What is corporate credit card fraud?

Corporate credit card fraud is a phenomenon whereby a criminal or an unauthorized individual gains access to the credit card of an organization, using it to make purchases for goods and services without approval for personal gain. 

Many people think only individuals get to have credit cards, but corporate entities have business cards too! These cards help corporate organizations streamline their expenses and improve the way they manage their spending. It also offers them convenience. But these advantages come with a considerable amount of risk. This risk is fraud. In this post we shall be examining how to protect your business from corporate credit card fraud, its impact on businesses, common fraud types, and actionable strategies to detect and prevent it.

Before we dive in, we have to let everyone understand why this menace of credit card fraud is such a big deal. Globally, credit card fraud losses are projected to reach $43 billion by 2026, driven by rising digital transactions and sophisticated cyberattacks. The U.S. accounts for 46% of these losses—the highest share worldwide—with domestic losses expected to surpass $12.5 billion by 2025.

To begin our discussion, we need to answer the question…

What Is Fraud?

Fraud can be defined as the act of deceiving people or organizations for financial gain. In the corporate world, fraud takes place under the aegis of unauthorized transactions, falsified expenses, or, more commonly, identity theft.

What Is A Credit Card?

Online Wikipedia defines a credit card as a “payment card, usually issued by a bank, allowing its users to purchase goods or services, or withdraw cash, on credit.” Since we have deduced that even businesses and corporate organisations use credit cards, we can now ask…

What Is a Corporate Credit Card?

US corporate giant J.P. Morgan defines a corporate credit card as “a card company's issue to employees to make work-related purchases. The business is liable to repay the balance on the cards, rather than the business' owners or the individual cardholders.” Now that we can tell what a corporate credit card is, we further need to ask…

What Is Corporate Credit Card Fraud?

Corporate credit card fraud is a phenomenon whereby a criminal or an unauthorized individual gains access to the credit card of an organization, using it to make purchases for goods and services without approval for personal gain. These fraudulent activities can include unauthorized purchases, the criminal making expense claims, card theft or cloning, or forcefully taking over the account and locking the organization’s access to the credit card itself.

What Impact Does Credit Card Fraud Have on Businesses?

Corporate credit card fraud can lead to:

1. Financial losses, especially through direct theft, chargebacks from the issuing financial organization, and fines from regulatory bodies when the organization gets flagged with fraud.
2. Reputational damage, which ultimately causes organizations to lose the trust they have with their vendors and clients.
3. Operational disruptions due to investigations carried out by regulatory agencies and the freezing of assets, including operational and transactional accounts.
4. Legal consequences that come to the fore with the organization’s non-compliance with fraud prevention regulations and guidelines.

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Common Corporate Credit Card Fraud Types

Some of the most common corporate credit card fraud types include 

1. Card-Not-Present (CNP) Fraud

This type of corporate credit card fraud occurs when fraudsters use stolen card details for online or phone transactions without physical card possession. CNP fraud accounts for 70% of all credit card fraud 

2. Account Takeover (ATO) Fraud

Here, hackers gain access to corporate card accounts by stealing login credentials or using phishing scams targeted at unsuspecting employees.

3. Card Theft & Cloning

This consists of the physical theft of corporate cards either by an employee or a foreign entity or the skimming of the credit card data at automated teller machines (ATMs) or points of sale (POS) terminals to create counterfeit cards.

4. New Account Fraud

In this example of corporate credit card fraud, fraudsters apply for corporate cards using stolen business identities or fake employee credentials, creating new credit card accounts in the process that will be used for their nefarious activities like money laundering, terrorism financing, and more.

Read Also: What are the Common Types of Scams

How To Protect Your Business From Corporate Credit Card Fraud

Understanding how to protect your business from corporate credit card fraud entails three things. They include:

• Detection
• Combating 
• Prevention

We shall be taking pains to expand on these elements below:

How Do You Detect Corporate Credit Card Fraud?

It is no news that early detection minimizes losses. To be able to detect credit card fraud, whether personal or corporate, you need to watch for phenomena including:

• Unusual spending patterns in the form of a sudden high-value purchase that nobody really knows about or wasn’t sanctioned by the board of directors or the managerial team.
• Transactions in odd locations, like having foreign charges made to the account when it was never traveled with. It can also be in the form of payments made with the details of the credit card in foreign countries for the purchase of goods and services.
• Duplicate or altered receipts being sent to the organization for the payment of certain goods and services through the credit card is a cause for alarm.
• Small "test" transactions that aren't the style of your organization. This is always the way fraudsters check if the card really does work before they make the devastating purchase that will wreak havoc on the targeted organization.

It is worth mentioning that AI-powered fraud detection tools (like Youverify’s transaction monitoring) can help organizations flag suspicious activity in real time, keeping your assets safe from the thieving hands of credit card scammers.

How Do You Combat Corporate Credit Card Fraud?

Combatting corporate credit card fraud is a responsibility of both the business and the cardholder. 

For businesses, they can combat corporate credit card scams by:

• Reviewing their transactions daily using automated expense management software.
• Setting spending limits that restrict high-risk categories like cash withdrawals and payment at luxury retailers.
• Requiring multi-level approvals for transactions, which comes with implementing MFA (multi-factor authentication) for large transactions.
• Training employees to look out for and report fraud by conducting regular fraud awareness sessions to keep them up to speed in accordance with the realities of the day and age.

For cardholders, corporate credit card fraud can be combated in the following ways:

• Monitoring account statements weekly and reporting discrepancies immediately to the management team, financial institution, or law enforcement.
• Using virtual cards for online payments as single-use numbers helps reduce CNP fraud risk.
• Enabling transaction alerts through instant SMS/email notifications for all charges to help you be aware if unknown or suspicious transactions occur.

How Do You Prevent Corporate Credit Card Fraud?

In order to prevent corporate credit card fraud, businesses should:

• Implement strict card policies by defining acceptable use and consequences for violations.
• Use AI-powered fraud detection like Youverify transaction monitoring solutions, which help analyze spending behavior for anomalies.
• Conduct regular audits, which basically are random checks, which goes a long way to deter internal fraud.
• Restrict card access by only issuing cards to employees who need them and are trusted or have passed the required clearance put in place by the organization.

Cardholders should prevent corporate credit card scams by:

• Being vigilant. You must never share card details with anyone or over unsecured channels.
• Using chip & PIN methods of payment, which are more secure than magnetic stripe transactions that can be skimmed.
• Destroying old, expired, or unused cards properly either by shredding, burning, or some other acceptable way.

Recommended: How to Identity a Bank Fraud to Keep Your Account Safe

Conclusion

Now that I have walked you through how to protect your business from corporate credit card fraud using a solution that helps to detect, combat, and prevent further fraud on your organization. We have also shown that businesses can fight back with strong policies, AI-powered monitoring, and employee training.

In addition to the above, integrating Youverify’s fraud prevention and compliance solutions helps detect unauthorized transactions and enforce compliance. Protect your business today—schedule a demo with  our fraud expert!