One employee travelling for work checked his dog into a kennel and billed it to his boss as a hotel expense. Another charged yoga classes to the corporate credit card as client entertainment. A third, after racking up a small fortune at a strip club, submitted the expense as a steakhouse business dinner.
These bogus expenses, which occurred recently at major US companies, have one thing in common: All were exposed by artificial intelligence algorithms that can in a matter of seconds sniff out fraudulent claims and forged receipts that are often undetectable to human auditors—certainly not without hours of tedious labour.
AppZen, an 18-month-old AI accounting startup, has already signed up several big companies, including Amazon.com, International Business Machine Corp, Salesforce.com and Comcast Corp and claims to have saved its clients $40 million in fraudulent expenses. AppZen and traditional firms like Oversight Systems say their technology isn’t erasing jobs—so far—but rather freeing up auditors to dig deeper into dubious claims and educate employees about travel and expense policies.
“People don’t have time to look at every expense item,” says AppZen Chief Executive Officer Anant Kale. “We wanted to get AI to do it for them and to find things the human eye might miss.” US companies, fearing damage to their reputations, are loath to acknowledge publicly how much money they lose each year on fraudulent expenses. But in a report released in April, the Association of Certified Fraud Examiners said it had analysed 2,700 fraud cases from January 2016 to October 2017 that resulted in losses of $7 billion. The world’s largest anti-fraud organisation found travel and expense embezzlement typically accounts for about 14 per cent of employee fraud.