Safeguarding against fraud and compliance risk in travel and entertainment expenses

It starts with pressure to improve sales. But it ends with fines, prosecution, and damage to your company's reputation. Maybe one of your employees makes a payment to someone they shouldn't. Gives an expensive gift to someone with power over appointing contractors. Or submits expenses for something that never happened.

Bribery, fraud, and corruption in the ever-competitive world of international manufacturing aren't uncommon. And when regulators find out, you end up facing the consequences.

A leading elevator manufacturer wanted to avoid exactly this. Its reputation is priceless, and it considers compliant and ethical business practices to be essential. Which is why it turned to Genpact to help manage its T&E risk.

Our initial review of the manufacturer's T&E environment suggested that it needed an enhanced scope of audit, as well as broader coverage, to prevent compliance breaches and meet its high ethical standards.

Its annual T&E spend was around $40 million, with approximately 8,000 expense reports generated per month, each with an average of ten line items. Although the company used an external accountant and SAP Concur to process these expenses, we discovered that it still relied on hard copies of supporting documents, such as receipts. It also performed manual auditing and used dashboard reporting to identify problems, which made spotting trends difficult.

Without a real-time view of high-risk spend and noncompliant behavior, the company was unable to take action where it was needed. Additionally, around 20% of its total employee base performed operations in China, which meant limited reviews of fake fapiaos and a strong risk of fraudulent, duplicate transactions. Put into a potentially dangerous position, the company needed a partner to help manage risk, address noncompliance, and guide staff toward ethical and thorough T&E submission.

Genpact's compliance-as-a-service solution and digital transformation capabilities, together with years of functional expertise, were a perfect fit for the manufacturer's challenges.

After discussions with the company's accounts payable team, we agreed to set up, test, and manage our CaaS expense audit solution, shifting the company to a fully compliant T&E operation.

First, we determined the manufacturer's business requirements. Next, we set up the automated expense solution, customizing the configurations to match the company's unique policy and regulatory rules. Finally, we tested our approach to make sure it worked properly alongside the previous method. Our solution involved:

• Setting up a digital platform to review expense reports that provided advanced analytics for fraud and regulatory risks, including:
  • Policy checks for prohibited or threshold-exceeding expenses
  • Fraud reviews for finding duplicates within and across expense reports
  • Checks for suspicious merchants
  • Confirmation of average prices
  • Regulatory reviews to identify government or sanctioned third parties
• Optimizing dashboards for a 360-degree view of all expense data. This allowed the company to monitor and analyze high-risk transactions so it could take immediate remedial and strategic action
• Embedding analytics to review expenses, with a focus on fraud and regulatory risk, to pinpoint high-risk trends and repeat offenders
• Identifying root causes and developing follow-up procedures for corrective action

With our solution, a high level of scrutiny now kicks in from the moment an employee submits their expenses. But what effect did this have?

With our digital solution, the company switched from paper records and manual audits to intelligent automation. The algorithms now do the heavy lifting, freeing up internal teams to focus on complicated exceptions. In addition, our CaaS solution delivered:

• Immediate identification of high-risk items, saving line managers time and effort across the organization
• Better visibility of exceptions for management through interactive dashboards
• An enhanced review of exceptions by an audit team equipped with more detail
• A 40% reduction in T&E audit costs and $7 million of savings within the first year
• Wider coverage of spend, resulting in improved employee compliance
• Routine enforcement of strict guidelines and limits, along with a better-trained workforce

Overall, the elevator manufacturer improved compliance and greatly reduced the risk of fake or incorrect fapiaos. With centralized data handled by custom algorithms, the company's accounts payable and controllership teams can now detect, analyze, and flag risks from the moment an employee submits an expense. They can also identify spend trends and drive strategic policy decisions, all while trimming costs and saving time.

Through a more robust approach to T&E expense management, powered by advanced analytics, the elevator manufacturer now rests easy, able to confidently state that it's an ethical business fully compliant with anti-bribery and anti-corruption regulations.