Expense Fraud Detection: How to Spot and Prevent False Claims

When it comes to corporate finance management, fraud is a very real risk. According to data from Experian, nearly 60% of companies reported an increase in fraud losses from 2024 to 2025, which is why expense fraud detection is becoming increasingly more important. Here’s what you need to know in order to better protect your business.

What is expense fraud?

At a high level, fraud is defined by the Association of Certified Fraud Examiners (ACFE) as “any activity that relies on deception in order to achieve a gain.” It becomes a crime when deception or misrepresentation is used for personal gain or to “deprive a person or organization of their money or property.”   

Expense fraud, therefore, is any deliberate act to circumvent company spending policies or report misrepresented or falsified spending for personal benefit. 

Why is it important to be aware of expense fraud?

Fraud is driven by intention, but it can also be accidental. Whether due to employees rushing through expense reports, misunderstanding expense policies, or making numerical mistakes, expense fraud is a costly issue that impacts your business’s bottom line. 

In fact, the ACFE reports that organizations lose 5% of their revenue to fraud each year, with $50,000 being the median business loss as a result of expense reimbursement fraud. Catching it quickly—or ideally, preventing it before it happens—is the key. The longer fraud goes undetected, the more it will end up costing your company. 

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The most common types of fraud

Expense fraud comes in several forms, the most common of which are: 

• Mischaracterized expenses: These are non-business-related purchases claimed as business expenses. They can be anything from the plausible, like cell phone lines and expensive dinners, to the outrageous, like theme park admission fees and cruise tickets (yes, these are real examples!).

• Falsified claims: These are claims submitted with false documentation, such as forged checks and invoices or stolen bank receipts. The documents are often taken from a friend or family member and claimed on an employee’s expense report as their own, or from a real vendor and altered using digital design applications or AI tools to inflate the amounts. In fact, 75% of business travelers in a recent global study believe it’s at least a bit likely that AI is already being used to fabricate expenses. Among U.S. respondents, that number jumps to 82%.

• Multiple claims: These are duplicative claims intentionally resubmitted for additional reimbursement. For example, an employee might submit a report for a product or service purchased in February, then do so again in April and again in September in the hopes that the approvers won’t notice. They might even submit to different approvers each time to decrease detection. 

• Inflated claims: These claims occur when an employee submits an expense report for more than they purchased. For example, an employee might buy more office supplies than they need, then return some of the items. They might then submit the original receipt on their expense report and be reimbursed for the full amount, allowing them to pocket the money from the return. 

How to Spot Expense Fraud Red Flags

To detect expense fraud within your organization, you need to look at the numbers, as well as the humans behind them.

Keep an eye out for spending and documentation red flags like:

• Duplicative expense reports

• Consistent overspending and noncompliance

• Altered or missing receipts and invoices 

• Altered transactions within the accounting system

According to the ACFE, you also need to consider employee conduct and look for common behavioral red flags like:

• Irritability or defensiveness

• Lack of transparency and reluctance to delegate

• Unusually close relationship with a customer or vendor

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How to prevent expense fraud

Because fraud is often difficult to detect, conducting proactive assessments of your company’s risk can increase your chances of catching fraud sooner or ideally preventing it in the first place. Check the strength of your company’s fraud protection protocols by asking: 

• Does your company have a process for oversight of fraud risk? If so, who owns it and how consistent and proactive is it?

• Has the board approved your risk management policy and provided their tolerance level for risk?

• What controls do you have in place today to prevent, deter, and detect fraud? 

• How do you promote ethical behavior, deter wrongdoing, and facilitate effective communication with employees?

To learn more about conducting fraud prevention assessments, you can watch this webinar with SAP Concur experts or download the ACFE Fraud Prevention Check-Up template. 

How AI helps protect against fraud 

Nothing puts your company at risk for fraud more than a reliance on manual processes. Duplicative expense reports, incorrect amounts, and other data are easily missed when processed by hand and can cost your company in the long run. AI, however, can quickly and accurately audit expense information in seconds. 

With automatic detection, AI can continuously monitor spending trends, analyze patterns, and flag unusual expenses for further review, while machine learning models adapt to new fraud patterns. AI can identify things the naked eye can’t, such as deepfake invoices with realistic logos, fonts, value-added tax (VAT), and totals, that a human might otherwise miss. It can also detect anomalies, duplicate charges, or missing receipts for travel and finance teams without the need for IT teams to manually define, monitor, and update rules. And, it can do all of these things at scale. 

As difficult as fraud can be to detect, proactivity is the best way to defend against it. Talk to an SAP Concur solutions expert today to learn how our automated, AI-powered solutions like Intelligent Audit, Concur Detect by Oversight, and Verify can effectively detect and prevent expense fraud.