Leave no room for fraud and compliance risk in T&E spend

This global engine manufacturer was concerned. Increasing fraud and unusually high T&E expenses compelled the company to take a closer look.

There were several warning signs. Duplicate claims and incorrect classification were suspicious but could have been clerical errors. Other red flags, however, pointed to potential fraud or failure to follow approval procedures.

For example, missing receipts were most frequently found under the category of “personal expenses," some receipts were submitted before the actual transaction date, and expenses had been claimed for events that cardholders hadn't attended. Also, transactions such as gifts to clients often didn't meet pre-approval requirements.

The manual approach to expense audits with limited use of data analytics led to poor visibility into T&E spend and noncompliance with anti-bribery and anti-corruption legislation, such as the Foreign Corrupt Practices Act and the UK Bribery Act. Fraud was going undetected. With no defined process for root-cause analysis, getting actionable insights to make process and policy changes proved challenging.

The company also lacked a standard reporting approach, so the leadership team couldn't be regularly updated on non-compliant expenses and spend leaks.

As part of its commitment to integrity, the engine manufacturer worked with Genpact to do a complete review of all existing policies and procedures to spot any cracks and inefficiencies.

We analyzed 100% of payment transactions from different systems, including corporate cards, wire transfers, and petty cash. We extracted data from the company's accounting systems and evaluated transactions using a risk-based analytics approach against the firm's policies and procedures and global ABAC regulations. We also ran advanced data analytics using customized scripts, and fuzzy and phonetic logic.

When this process flagged questionable issues, such as improper payments, non-compliance, or incorrect accounting, we sent them to our risk and compliance team for further evaluation.

Our analytics-driven audit methodology

We ran algorithms customized to the engine manufacturer's policy guidelines and identified high-risk transactions using criteria such as keywords, prohibited vendors, transactions on weekends and holidays, cash transactions, and duplicated amounts. We also ran searches on various merchant databases (such as The Office of Foreign Assets Control's Specially Designated Nationals and Politically Exposed Persons) to identify suspicious and blacklisted vendors and transactions.

Our team then carried out detailed testing of the potential exceptions, including examining supporting documents and conducting interviews with relevant employees. Through this deep analysis of systems, policies, procedures, and expense histories, we found non-compliant expenses.

We presented our findings in regular meetings with the manufacturer's controllership team, enabling them to work on improvements. The team also gained complete visibility into the company's expense operations through global real-time reporting.

The company implemented the recommendations for each of its jurisdictions across the US, UK, Japan, and other parts of Asia to drive stronger compliance with corporate T&E policies. It also introduced an interactive reporting process that gives a consolidated picture of high-risk transactions for each business unit across the globe.

With our help, the manufacturer reduced T&E noncompliance from 29% to 16% through improved employee behavior. And, the company recovered 1–1.5% of its annual T&E expenditure from previous payments.

The engine maker now has to worry less about controlling its T&E spend and facing huge penalties from flouting ABAC regulations.