Fraud risks of cash within Airline spend

American Airlines announced that it will no longer accept cash for checked bags or bags that are overweight at 50 airport locations according to NBC Miami. Airlines for many years have been moving towards a completely cashless operation. In 2009, Delta went cashless for all domestic inflight purchases. Many airlines have even limited the ability to purchase tickets with cash. Jetblue, known as a low cost carrier who’s target market includes small businesses and ‘unbanked’ travelers, is completely cashless for inflight purchases.

Airline Operational Risks

There are a number of overlapping fraud and security risks within this news story. Moving to cashless helps the airlines improve operational costs and reduce fraud risks within their OWN employee populations. Moving to credit cards also helps airlines become stronger partners with federal law enforcement and the TSA. Travel is an essential part of every ‘business’ operation, even the illegal ones. While criminals can still pay with a prepaid credit card, it does improve the overall identity management of purchases. Money laundering through travel has been an issue for many years. In 2007, the British HMRC broke up a scheme that laundered £500 million through a single travel agency. In parts of Asia the scheme is so common that they even have a name for the activity… ‘Ying Yang’ contracts.

Employee Fraud Risks

Corporate expense management programs should monitor for cash purchases of airline spend on expense reports. Airline baggage fees are routinely the same amount on every single transaction. An employee might be recycling their receipts on reoccurring trips even when no baggage fees happened. An employee running this scheme might not be aware that American Airlines no longer accepts cash at 50 airports. Focus your audits on this specific spend type, usually marked as ‘Baggage Fees’, and filter to ‘Employee Paid’. Then audit the attached receipts to make sure it says the transaction was paid with a credit card. If it was a fraud scheme the fake receipt might still say ‘cash’.

If this process flags an employee it could be an indication of fraudulent activities. Analyze their other transactions for more flags and place the employee into a 100% audit category for continuous scrutiny.