ReportWire

Tag: Employee fraud

  • Are Your Employees Using AI to Create Fake Expense Receipts?

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    Countless business owners now use artificial intelligence tools to automate work tasks, boost productivity, and lower their costs. But some employees are also finding ways to use chatbots to enrich themselves on their employer’s dime, as more workers are turning in business expense reports padded with fake receipts created by online AI apps.

    Multiplying media reports and social-platform posts note the increased use of phony AI-generated restaurant, hotel, and transportation bills by less than upright employees, who ask their companies to reimburse those fictive outlays as work expenses. This small-scale fraud often depends on easily accessible, and often free, online chatbots that no employer would ever want used for low-level grifting. But whether they’ve been tipped off to the practice by online messages or discovered it themselves through experimentation, a growing number of people have learned that platforms like ChatGPT can quickly serve up a bogus lunch chit to foist on an unsuspecting boss for repayment.

    It’s still not clear how many businesses are being swindled by this relatively recent scam—or how much those scams costing employers. Remote payments news site Pymnts recently released a study finding “68 percent of organizations encountered at least one fraud attempt” through their accounts payable services, including fake employee receipt submissions.

    This form of grifting isn’t new. For decades, some incorrigible employees have used applications like Photoshop to doctor receipts collected by other people to appear as their own business expenses, and other pre-AI software lets people create faux invoices from scratch.

    But the flow of authentic-looking and hard to detect AI fakes may increase soon. Word continues to spread rapidly about how authentic looking chatbot-created forgeries look—and how difficult it is for employers to spot them before reimbursing funds employees never spent.

    “You can use [ChatGPT] 4o to generate fake receipts,” noted tech sector employee Deedy in a March post on X. “There are too many real world verification flows that rely on ‘real images’ as proof. That era is over.”

    Just how easy is it to create a sham proof of payment slip?

    One AI novice reporter—who started in print media back when publications still used telexes as communications tech—managed to create a passable first attempt fake receipt in under a minute. Gaining access to a more powerful version of the same free chatbot—and refining the input prompt to specify restaurant location, and the last numbers of a real credit card to be used in the sham bill—would have likely resulted in an entirely convincing forgery. The initial results are already impressive:

    That ease and effectiveness of using AI to make bogus receipts is already causing some employers to revert to old-school accounting methods to confound digital expense frauds.

    “Lock it up, and get out,” said BB_Fin on a Reddit thread titled “ChatGPT now allows the creation of photorealistic fake receipts” earlier this year. “We’re going to a full paper based system again. The future is the past.”

    But there are more modern ways to battle the problem for employers willing to pay for them.

    Tech companies including Expensify, SAP Concur, and AppZen already have or are developing tools to spot AI-generated fake receipts. Those apps aim to rectify one of the biggest flaws that allows forgeries to sneak through: Automated AI platforms used to vet submitted employee expense accounts are often unable to identify the fraudulent bills created by the same or a similar app.

    In response, new products are siccing multiple AI agents on submitted digital receipts to catch telltale tip-offs in fakes. Those include the metadata fingerprints that bots are programmed to leave on images they generate, mathematical errors chatbots can make on fake chits, and their occasional hallucination that puts incompatible items like dry cleaning or taxi charges on a restaurant bill.

    “[O]ur Mastermind AI models work together, creating a platform of checks and balances,” wrote AppZen co-founder and CTO Kunal Verna on LinkedIn last April. “Where one model might miss a forgery, another catches it. This layered defense system is crucial because there’s no single ‘silver bullet’ for detecting the latest AI-generated fakes.”

    Social-media users report that continued development of widely used AI assistants like Copilot are also starting to flag fake receipts they’ve been asked to analyze.

    “Copilot: The receipt appears to be fake,” noted imnotokayandthatso-k in the same Reddit threat on forged receipts. “The listed items and prices are unusual and do not match the typical offerings and prices at Texas Roadhouse…. These items are not found on the official Texas Roadhouse menu. The prices are also extremely high compared to the usual prices for dishes at Texas Roadhouse.”

    For that reason, people claiming to be practitioners of pre-AI receipt forgeries say they’ll stick with software and hard-copy printouts of fake receipts they create by themselves.

    “Receipt printer from AliExpress: $20,” redditor DutchTinCan said in the Reddit thread. “Photoshop license: $89. Unlimited expense receipts: Priceless.”

    Except that’s not so for their employer, who’s shelling out money to reimburse those phony expenses.

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    Bruce Crumley

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  • Employee Theft is More Common Than You Think. This is What You Should Do About It. | Entrepreneur

    Employee Theft is More Common Than You Think. This is What You Should Do About It. | Entrepreneur

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    Opinions expressed by Entrepreneur contributors are their own.

    Are you a fan of chicken wings? So much so that you’d be willing to drop $1.5 million on the stuff?

    According to a CBS News report, Vera Liddell — a former director of food services at a school district in suburban Chicago — was. She purchased, yes, $1.5 million worth of wings from July 2020 until February 2022 — placing hundreds of unauthorized orders, which were then paid for by the district and then received by her. Authorities are still investigating the scheme, but it’s obvious that Liddell — assuming she’s guilty — likely sold the wings for a profit.

    How did the scheme get uncovered? A $300,000 budget overage caught the eye of accountants. Oh, and someone noticed that the school district doesn’t even serve chicken wings.

    The theft of so many chicken wings may be a little unusual. But fraud at a business certainly isn’t. Almost every day, you can read reports about how employees are stealing from their employers.

    There’s the legal secretary in New Jersey that allegedly wrote more than $184,000 in checks from her firm’s account for her friends and family. Or the procurement manager at a New York business that has been accused by the FBI of creating fraudulent invoices that directed payment into his personal account. Or the human resources manager at a small manufacturer in Pennsylvania who gave herself raises and also spent thousands of dollars of her employer’s money using the firm’s credit card. There’s the financial manager of a Minnesota-based property management company who embezzled more than $1 million from company funds. And the director of accounting services who stole more than $2 million from her employer and used it for trips and other personal expenses.

    Related: I Know How To Easily Steal Money From Your Company’s Bank Account

    There’s the employee at a small bank who created and paid himself with cashier’s checks using forged signatures. Or the office manager at a law firm in Rhode Island that walked away with hundreds of thousands of dollars in firm funds. Or the employee at a Florida beer distributor that tampered with the company’s accounts receivable system to steal more than $300,000. Or the bookkeeper of a Delaware nonprofit who stole more than $2.6 million over a 25-year period.

    It doesn’t really matter to you and me why these people did these things. And it doesn’t really matter how. What really matters is when.

    Like many cases of fraud, these incidents — and countless others — happened over a period of time and were ultimately discovered long after the money disappeared. And although prosecuting these people may provide some psychological relief to the business owners who were victims they’re still out of pocket. The money stolen over all those years has been spent. Some of it may be reclaimed. But most of it is long gone. You don’t want this happening. So what should you do to prevent this kind of thing from happening before it happens? Well, there are a few things.

    For starters, you don’t put one person in control of everything. You segregate duties. Entering a customer invoice into your accounting system and inputting cash received should be done by two different people. The same goes for the payables side. If three people were ordering, receiving and paying for those chicken wings, it’s likely that one of them would have questioned why the school district was buying chicken wings, let alone why there wasn’t any buffalo sauce included. You should also have an outside person — an hourly financial temp worker — do your bank reconciliations.

    Your open accounts receivable report — and financial statements — should be closely reviewed every month by someone other than your accounting staff. That’s you. And while you’re at it, ask your bookkeeper to print out your monthly general ledger activity and take an hour out to read it. It’s not exactly pulp fiction, but your general ledger is basically the financial diary of your business and the devil’s always in the details. Identify and investigate any transaction that seems unfamiliar or unusual. Hopefully, you’ll get reasonable answers, but there’s always a chance you won’t.

    Related: How to Reduce the Risk of Fraudsters Accessing Your Business and Personal Bank Accounts

    Oversight is critical. A police friend of mine once told me that to perform the perfect crime you can’t include anyone else because once more people get involved it’s no longer perfect. The same goes for accounting.

    Another important tactic is to require that everyone — particularly anyone who deals with your money — takes a vacation. When someone is out of the office, and someone fills in for that person, you’re not only making sure that there’s cross-training, but it’s very likely that the fill-in will stumble on something unusual if something unusual is happening. The more frequent vacation is required — at least twice per year — the more you potentially limit the amount of time a fraud could take place. You don’t need workaholics. You need your money.

    It’s also important that you have a formal process for disbursing funds. That means getting written approval from multiple people for transactions over a certain amount. The approvals can come using an electronic signing platform, or you can ask your accounting software provider. Yes, even this type of procedure can be circumvented by the wily bookkeeper. But putting these controls in place and sticking to them will pick up anything significant and at the very minimum send a message to all employees that you have a control system and deem it important.

    Finally, get insurance and get your financial employees bonded. Make sure you have coverage for theft and business loss or interruption that’s caused by theft. This kind of insurance is relatively inexpensive so buy a lot of it.

    As business owners, the problem we all have is we trust too much. We are generally optimistic souls who believe that people wouldn’t harm us. But that’s not really true, is it? If you don’t believe me, I’ve got a few thousand pounds of chicken wings to sell if you’re interested.

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    Gene Marks

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