Using an Organization's Credit to Commit Fraud, Part 1

By Joseph R. Dervaes, CFE, CIA, ACFE Fellow

joseph-dervaes-80x80.jpg   Fraud's Finer Points
Case History Applications

Fraud by using an organization's credit is a type of fictitious expense scheme. In the ACFE's fraud tree, the crime is a subset of fraudulent disbursements, which is a subset of cash schemes.

There are many types of fraud involving an employee's use of the organization's credit to purchase assets (i.e., goods and services) for personal benefit. Unauthorized use of the organization's general credit cards, purchasing credit cards, travel credit cards or business charge accounts are some of the most common fraud schemes I have encountered during my career. Unscrupulous employees cause victim organizations to order and pay for assets they do not really need. Obviously, the damage to a victim organization is the money lost in purchasing these unnecessary items.

The individuals who commit these crimes are usually responsible for approving and processing transactions for payment. They may rely on the inexperience of their supervisors (or their organizations' governing bodies) to unknowingly process their fraudulent transactions in the disbursement cycle. Victimized organizations then issue checks for unauthorized business purposes, and the wayward employees receive personal benefits.

We begin this three-part series with employee abuses of general organization credit cards.


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