How to identify and prevent expense fraud

Updated: September 2026

Every business is, unfortunately, vulnerable to employee fraud. There are currently more than 5,000 yearly reports of employee theft at UK businesses.

Whether expense fraud is being undertaken maliciously or as a result of human error,  it’s essential to ensure your expense process is easy to use and minimises opportunities for honest mistakes, while also being transparent enough to spot and investigate suspicious claims quickly.

This guide outlines what employers need to know about expense fraud, how it could affect your business, and how to prevent it from happening altogether.

Watch the video below for a quick overview before we dive into the details.

What is expense fraud?

Expense fraud refers to a deliberate attempt at inflating reimbursements. It occurs when an employee knowingly completes inaccurate expense claims. 

This can include things like:

• Over-claiming for restaurant tips

• Submitting receipts above per diem limits

• Turning in receipts for unused items

• Expensing old receipts for a second time, to claim twice

• Disguising personal expenses as business ones

• Claiming for things that were provided free of charge

Expense fraud is often committed by people who don’t recognise their actions as being fraudulent. There are a limited number of cases where there are genuine ‘bad actors’ when it comes to cases of expense fraud, but it’s still an issue that needs to be monitored.

How big a problem is expense fraud?

24% of UK employees say they know someone who has committed expense fraud in the past year. It was the most witnessed behaviour in Cifas’ workplace trends report.

This can be riskier in companies where individuals have direct access to funds and reporting with little oversight.

Globally, the departments with the highest rates of expense fraud on average include:

• Executive/upper management (24%)

• Accounting (21%)

• Administrative support (17%)

• Finance (17%)

The same research found that 62% of organisations in Western Europe were unable to successfully recover fraud-related losses.

Expense fraud can also be a sign of a larger problem within your business, such as:

• Culture problems where, if one person commits expense fraud, others are willing to copy

• Gaps in your expense reporting process

• The need for extra training to prevent slips

Common types of expense fraud

Knowing and understanding the types of expense fraud will empower your finance teams to spot anything unusual. Let’s take a look at the most common types of expense fraud and some possible business scenarios.

Mischaracterised expenses

This is where a worker submits personal expenses under the guise of a business expense. Claims like this easily slip through the net, as there is usually no way of categorising the claim as fraudulent by only looking at the submitted receipt.

Research suggests that most expense receipts are approved without question: 86% of global office workers said that they have never had any of their expense claims challenged or declined.

Overstated or inflated expenses

Overstated or inflated expenses are where legitimate travel expenses are manipulated to claim more money back than what was actually spent, for example, padding mileage or showing a larger tip than what was actually paid.

Fictitious or fabricated expenses

Fabricated expenses are fake receipts that appear to be genuine. Work travellers might use a range of tactics, such as using stolen, blank receipts from taxis to claim for journeys that never happened, or expensing a meal that was provided free of charge.

Multiple reimbursements 

Multiple reimbursements, or duplicate claims, are where a traveller submits the same receipt for an item multiple times, hoping that the finance team doesn't notice and approves duplicate payments.

Why do people commit expense fraud?

Companies might wonder what the motivation is behind their workers choosing to take such a big risk for seemingly so little reward. Many people justify expense fraud with one of the following arguments:

• If the reimbursement cycle doesn't happen fast enough, some workers may feel entitled to ‘surcharge interest’ on the debt

• Others may feel they’ve earned the right to do it because they put in a lot of overtime or have spent time away from their family.

• Their colleagues are getting away with claiming false expenses, so why shouldn’t they also take advantage?

• They’re not happy with their remuneration and see claiming false expenses as an opportunity to make this right

HMRC‑commissioned research found that many employers (45%) use expenses as a staff satisfaction tool, which can blur boundaries and expectations if not tightly controlled.

The rising cost of living in the UK may also embolden some employees who have only taken a chance with minor amounts historically. And during times of economic downturn, the uncertainty of the period may tempt employees who have never committed expense fraud to supplement their incomes in a relatively easy way.

How to identify expense fraud

The Association of Certified Fraud Examiners data shows that a typical worker committing fraud at work was able to do so for a full year before being apprehended. Fraud at work caught within the first six months had a median loss of less than £23,000 globally (converted), compared to more than £185,000 for fraud that lasted between two and three years. So, early detection of expense fraud is critical for damage limitation. 

Start with policy

You cannot attempt to identify expense fraud without a clear policy in place. A well-written policy and an expense management system that flags irregularities will help you identify anything amiss.

Fraud red flags

There may be some patterns of behaviour when it comes to expense reporting that indicate that something isn’t right. However, you must have robust physical evidence and involve HR if you suspect someone of committing expense fraud. A ‘gut feeling’ or a standalone behaviour change is not enough to accuse someone of expense fraud.

That said, here are some signs to take note of:

Avoiding providing documentation 

• A worker might often lose their receipts or claim that they accidentally threw them away. They might submit damaged paper receipts or blurry photographs of documents 

Submitting expenses late

• A pattern of submitting expenses at the very last minute could indicate a hope that finance teams will be too hurried to look into the details, or may have forgotten key context

Exploiting approval thresholds

• Some workers might habitually submit receipts that are just under the threshold for needing managerial approval, or submit lots of low-value purchases

Vague details

• Expenses might be submitted with only vague details, such as ‘client meeting,’ in an attempt to disguise personal transactions

Signs of struggling

• It may be that your team member is undergoing financial hardship and needs support. Domestic abuse is also a risk factor here, as if the worker is a victim of financial abuse, they may be vulnerable and desperate to find money elsewhere

Expense fraud prevention tips

A new corporate offence for failing to prevent fraud was introduced in 2023 as part of the Economic Crime and Corporate Transparency Act (ECCTA).

Though this is aimed at fraud committed with the intention of benefiting a large organisation or its clients, it signals a growing onus on employers to demonstrate they are actively preventing fraud in their organisations.

Safeguarding your organisation from becoming a victim of expense report fraud doesn’t have to be complicated; however, there’s no quick solution.

It’s important to start by maintaining strong internal controls. There are a few key steps finance teams can take into consideration to help cut down instances and minimise impact when it comes to balancing the books.

Communicate your policy 

Your expense policy should be regularly communicated to your employees, and provide detailed info on prohibited activities and per diem amounts.  

Employees will be more likely to think twice if the rules and the consequences are clear, and finance teams can investigate out-of-policy claims quickly and efficiently.

This communication doesn’t start and end with unveiling your policy. Prioritise ongoing anti-fraud training with your team, educating them on types of fraud, the effect on the business, and best practices.

Give your employees the right tools

1 in 5 UK employees we surveyed (22%) said their company's expense process is too complicated. Putting improved systems and tools in place can simplify the process, making it easier for employees to claim the right amount and for the policy to be followed.

Using an all-in-one travel management platform will make it easier for your teams to flag any issues and identify out-of-policy spending. Check out our spend management ROI calculator to see how much you could potentially save.

With Perk, workers can submit single expenses just by snapping the receipt with the mobile app. Perk's AI functionality then verifies the expense for compliance with the regulations configured by your business. 

Simplify expense management

Ultimately, more than half of all occupational fraud worldwide happens because of an ‘insufficient system of internal controls’, so your expense management processes are a great place to start. 

Think about implementing the use of corporate credit cards for greater control. With corporate cards, companies can query each card individually and get better oversight on spending patterns. You’ll also receive credit activity reports on a monthly basis from the issuing company.

For even greater transparency, P-cards are a great option for certain business expenses. These cards are restricted by pre-defined limitations, such as spend category or vendor type, allowing for real-time spend control.

Keep allowance rates up to date

One of the best ways to avoid employees submitting forms for additional expenses is to keep your rates fair and up-to-date. Consider the age of your expense rates and whether they are still applicable. There will also be regional variances in the cost of living: a meal in London is likely to cost more than the same meal in Leicester.

Our guide to HMRC subsistence rates will provide some reference on what is deemed a fair and tax-free amount, depending on the city.

Using a travel management solution like Perk will allow you to update these travel policies centrally, so they’re easily accessible for your team.

Leverage automated expense reporting to prevent fraud

The key to minimising expense fraud is implementing an automated process that digitises many of the touchpoints where fraud could occur.

Perk’s all-in-one platform is designed to help to prevent expense fraud by streamlining the reporting process with AI-driven compliance and custom workflows. This provides a level of automation, transparency and accuracy that eliminates the shadow work that could cause errors leading to accidental expense fraud. 

To discover what Perk’s expense management solution can do for your business, book a demo today.