Ten tips to preventing p-card fraud
New report outlines best practices for monitoring purchasing card (or p-card) purchases for fraud.
By Maria Varmazis -- Purchasing, 6/12/2008 6:00:00 AM
In late May, financial services firm JPMorgan released a new best practices report for monitoring purchasing card (or p-card) purchases for fraud. Here it is:
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Identify who on senior management will champion the anti-fraud measures. Make sure the anti-fraud team incorporates members from around the corporation, so that all departments comply with the measures. P-card provider Visa suggests the program manager and administrator works with finance, accounts payable, human resources and procurement in order to make sure all purchases on the company p-card match up with set procedures.
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Designate checks and balances. "At a minimum, cardholders should not be their own approving manager or approving executive," says JPMorgan's report. One suggestion is that all purchases are approved by a direct manager, while some p-card programs do weekly checks of purchases that are red-flagged.
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Keep anti-fraud policies consistent across the board. All p-card holders should be held to the same rules and standards—so once the regulations are in place, stick with them. Consistency avoids confusion and lessens the potential to exploit loopholes. Use technology to your advantage here, too: if a cardholder breaks a rule, automated systems can send them e-mail reminders of the policy they have potentially violated.
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Before the cards are issued, make sure cardholders are trained. The more a p-card user is educated, the less likely they are to break the rules. Keep a record of who has undergone training and if it was in person, over the phone or online. An added bonus of these records is they can support Sarbanes-Oxley transparency initiatives.
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Stop bad spending before it happens—put protective measures up front. Some examples of protective measures include spending limits per-transaction or per-month, as well as blocked merchant category codes.
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Technology can help, use it to streamline the auditing process. There are many on-demand and installed software services to help p-card administrators run their services which include the ability to monitor card activity in real-time and to block any unauthorized buys. These programs can often keep tabs on users by making them interact with the system, which serves as a psychological tool reminding to p-card users that their purchases are being monitored by the company.
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Adapt monitoring processes according to your business. Depending on your business, you may need more—or fewer—restrictions than what traditional auditing programs dictate.
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Create a comfortable environment for cardholders. If there's a problem with card usage, or if a cardholder has a question, a hostile environment will just keep them from reporting any problems. In order for any kind of auditing program to succeed, it has to be adopted by users who do not feel that they can't raise any objections if need be. If a p-card user runs into problems and needs their card permissions changed, they should feel that someone will seriously consider their request.
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Before audits, hold regular peer reviews. Not only will this keep the organization in compliance for any Sarbanes-Oxley requirements, but it will make sure the auditing program is on track and hitting the company's set targets.
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Learn from your peers. Network with other institutions to learn where other programs succeed.
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