Many people think only individuals get to have credit cards, but corporate entities have business cards too! These cards help corporate organisations 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. The Association of Certified Fraud Examiners (ACFE), showed in a research that businesses lose an estimated 5% of annual revenues to fraud, with payment fraud being a major contributor. The US’ Federal Trade Commission (FTC) also backs this up with a report released stating that in 2023, over $10 billion were recorded in losses due to payment fraud, with corporate credit card fraud accounting for a growing portion of these losses.

To begin our discourse, 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 on the aegis of unauthorized transactions, falsified expenses, or, more commonly, identity theft.

What Is A Credit card?

Online encyclopedia 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 giants, 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, let me give you another definition……

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?

Company 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 ultimately causes organizations to lose their trust 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.

A 2024 PwC report found that 46% of businesses experienced payment fraud, with corporate cards being a prime target.

Related: Fraud Management in Commercial Cards.

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 company 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 (Javelin Strategy, 2024).

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.

Related: Handling Employee Misuse of Corporate Credit Cards

How To Protect Your Business From Corporate Credit Card Fraud

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

1. Detection

2. Combating and 

3. Prevention

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

How to you report credit card fraud

To report corporate credit card fraud effectively, follow these key steps:

1. Contact the Card Issuer Immediately: Call your corporate credit card issuer as soon as you detect unauthorized or suspicious transactions. Request them to freeze or cancel the compromised card to prevent further fraudulent charges. The issuer will typically issue a replacement card and may require you to dispute the unauthorized transactions formally.

2. Dispute Unauthorized Charges: Work with your card issuer to dispute fraudulent transactions. You may need to sign a statement confirming you did not authorize the charges. Follow up with a certified letter to the issuer’s billing inquiries address to document your dispute formally.

3. Initiate an Internal Investigation: Conduct a thorough review of the transactions, gather evidence, and interview involved employees to determine the scope and source of the fraud. Maintain detailed records of all findings and actions taken.

4. Notify Relevant Authorities: Report the incident to law enforcement agencies and provide all relevant documentation. Also, file a report with the Federal Trade Commission (FTC) via their online portal or by phone (1-877-FTC-HELP)

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:

1. 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.

2. 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.

3. 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.

4. 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 the responsibility of both the business and the cardholder. 

For businesses, they can combat corporate credit card scams by

1. Reviewing their transactions daily using automated expense management software.

2. Setting spending limits that restrict high-risk categories like cash withdrawals and payments at luxury retailers.

3. Requiring multi-level approvals for transactions, which comes with implementing MFA (multi-factor authentication) for large transactions.

4. 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 by the following ways:

1. Monitoring account statements weekly and reporting discrepancies immediately to the management team, financial institution, or law enforcement.

2. Using virtual cards for online payments as single-use numbers helps reduce CNP fraud risk.

3. Enabling transaction alerts through instant SMS/email notifications for all charges to help you be aware if unknown or suspicious transactions occur.

Related: How to Prevent and Protect Against Corporate Credit Card Fraud

How Do You Prevent Corporate Credit Card Fraud?

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

1. Implement strict card policies by defining acceptable use and consequences for violations.

2. Use AI-powered fraud detection like Youverify transaction monitoring solutions, which help analyze spending behavior for anomalies.

3. Conduct regular audits, which basically are random checks, which goes a long way to deter internal fraud.

4. 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:

1. Being vigilant. You must never share card details with anyone or over unsecured channels.

2. Using chip & PIN methods of payment, which are more secure than magnetic stripe transactions that can be skimmed.

3. Destroying old, expired, or unused cards properly either by shredding, burning, or some other acceptable way.

Related: How to Protect Your Business from Corporate Credit Card Fraud

Conclusion

Now that we have checked out how to protect your business from corporate credit card fraud, we can tell that three elements must be put in place which help to detect, combat and prevent further fraud and its effect on the organisation. We have also shown that businesses can fight back at this menace with strong policies, AI-powered monitoring, and employee training.

In addition to the above, we have shown that Youverify’s fraud prevention solutions help detect unauthorized transactions, enforce compliance, and secure corporate spending. Why don’t you protect your business today—schedule a demo with a Youverify fraud expert!