6 Ways to Identify and Mitigate Risks of Expense Report Fraud in Life Sciences

Expense report fraud poses significant challenges for the life sciences industry. 

Beyond financial losses, undetected fraud can impede regulatory compliance and compromise business integrity. 

For life sciences companies, these infractions can lead to reputational damage, loss of stakeholder trust, and even severe legal consequences.

This article outlines actionable strategies to identify and mitigate the risks of expense report fraud. 

Whether you’re a Finance Manager, Compliance Officer, or legal professional, understanding how to protect your organization can save time, money, and hassle—and ensure long-term credibility. 

Additionally, getting insights into commercial expenses provides life sciences companies with actionable intelligence that allows them to mitigate the risk of expense report fraud, assuring compliance effectively. 

Common Types of Expense Report Fraud in Life Sciences

Expense report fraud takes various forms – some straightforward and others more sophisticated. 

However, regardless of the type of fraud, knowing what to watch for is your first line of defense against all types of non-compliance. 

Below we’ve mentioned a few of the types of expense report fraud that are a common occurrence in the life sciences industry: 

1. Mischaracterized Expenses

This occurs when employees label personal expenses as business-related. For instance, personal meals, spa visits, or entertainment costs could be disguised as business expenses. 

2. Inflated Expense Claims

Employees may overstate the actual costs of allowable business expenses. Examples include inflating the price of a meal or a hotel stay far beyond what was incurred.

3. Duplicate Submissions

Another common risk of expense report fraud involves submitting the same receipt multiple times under different categories—or even in different reporting periods.

4. Fake Receipts or Fabricated Claims

Employees may falsify receipts or submit completely fabricated claims for reimbursement. 

This type of fraud is particularly difficult to spot without appropriate checks in place.

Each of these scenarios could result not only in financial loss but potential compliance breaches that could expose your organization to heightened regulatory scrutiny.

Developing Robust Policies and Guidelines

The foundation of any fraud prevention program is a robust set of clear, enforceable policies. Without clear guidelines on commercial compliance, employees are more likely to submit questionable claims, often inadvertently. 

When such expense claims draw the attention of regulatory authorities and non-compliance is identified, the consequences include regulatory scrutiny, fines, penalties, reputational damage, and more. 

Here’s what you can do to minimize the risk of expense report fraud, and the consequences mentioned above: 

• Create Comprehensive Policies

Your expense reporting policies should cover:

• Eligibility: Define what constitutes a business expense. 
• Receipts: Specify what documentation is required (e.g., original receipts).
• Timelines: Set strict deadlines for filing expense reports.
• Consequences: Clearly state repercussions for fraudulent submissions.
• Provide Regular Updates and Training

Expense policy isn’t a “set it and forget it” procedure. Expense reporting solution providers such as qordata recommend updating policies regularly to adapt to new risks and regulatory demands. Train employees on these updates, ensuring they understand expectations and procedures.

Leveraging Technology for Fraud Detection

Advanced technology has transformed how organizations manage and detect fraud. Leveraging automation and artificial intelligence (AI) can significantly enhance your ability to spot discrepancies.

• Use Intelligent Expense Management Software

Platforms like SAP Concur offer features such as automated receipt scanning and AI-driven anomaly detection. These tools can flag unusual claims, such as excessive amounts or out-of-policy spending. 

• Integrate Analytics with Compliance Systems

AI-powered analytics tools can be integrated into compliance programs to provide insights into spending trends and behaviors. For instance:

• Pattern recognition for high-risk employees or departments.
• Alerts for out-of-policy expenses.

The use of such tools not only improves efficiency but also builds a system that enforces accountability at every level.

Conducting Regular Audits and Spot Checks

The secret to uncovering fraud lies in continuous monitoring and reviewing of expense reports.

• Plan Regular Audits 

Conduct thorough expense audits on a set schedule. Use data analytics to prioritize higher-risk reports or employees for detailed reviews.

• Implement Spot Checks

Random spot checks act as both a deterrent and a detection tool. Employees are less likely to falsify their reports if they know they may face an unplanned review.

• Adopt Risk-Based Auditing

Focus audits on high-risk activities, such as frequent international travel or entertainment expenses.

Enhancing Transparency and Accountability

Creating a transparent workplace culture and fostering accountability go a long way in mitigating fraud risks.

• Managerial Oversight

Expense reports should undergo scrutiny by managers. Delineate their role in reviewing and approving expenses.

• Encourage Reporting 

Provide employees with secure, anonymous channels for reporting discrepancies. A whistleblower hotline, for instance, promotes openness and identifies fraud that might otherwise go unnoticed.

Providing Training and Education

Employees at all levels need to be educated on ethical expense reporting. A well-informed workforce is less likely to commit fraud—either knowingly or inadvertently.

• Organize Regular Workshops 

Host periodic training sessions to educate employees about fraudulent behaviors and the consequences of non-compliance.

• Use Real-Life Examples

Interactive training with real-life fraud cases can drive home the importance of ethical behavior. Employees are more likely to understand—not to mention retain—these lessons when they feel relevant.

Encouraging Collaboration Across Departments

Fraud prevention is not the sole responsibility of compliance officers or finance teams. It demands a collaborative approach across functions.

• Collaboration Among Compliance, HR, and Finance Departments 

Each department brings unique expertise to the table. For example:

Finance Teams: Identify out-of-policy spending. 

HR Departments: Manage behavioral training. 

Compliance Officers: Ensure adherence to legal and regulatory standards.

• Communication is Key

Establish clear, easy-to-use reporting channels for identifying and investigating suspicious activities. A unified front across departments creates a more fraud-resistant environment.

Building an Expense Fraud-Resistant Organization

Fraud can never be completely eradicated, but it can be minimized through robust policies, innovative technologies, and a transparent workplace culture. 

By identifying risks and implementing these best practices, your organization can reduce exposure to fraud and safeguard both its financial health and reputation.

qordata specializes in fraud detection and compliance solutions for life sciences companies. The advanced AI-driven analytics tools we offer are designed to identify and mitigate the risk of expense report fraud efficiently. 

Also Read: The Evolution of Expense Management Software: Trends to Watch