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Fuel card fraud: Prevent it and protect your fleet
Fraud is becoming more sophisticated, harder to detect, and more costly for businesses – 80% of organizations experienced payment fraud attacks in 2023, a 15-percentage point increase from the previous year. Operations leaders estimate that 19% to 22% of their fleet spend is lost to theft and fraud.
Read on to learn about how fraud impacts operations for businesses with a fleet of commercial vehicles, what’s considered fraud, and various preventive measures for businesses to safeguard their fleets from fraudulent activity.
Learn how WEX helped NexTier protect against fraud
NexTier’s 3,200 vehicle fleet has the ultimate protection with WEX
What actions are considered fuel card fraud or indicate fraudulent activity?
Fuel card fraud takes various forms, all involving some form of fuel card misuse or unauthorized use. Here are some examples of fraud or signs that may indicate suspicious activity:
- Unauthorized purchases: Simply put, these are fuel card transactions that the fleet manager didn’t approve.
- Fuel card skimming: This involves copying a card’s information, using a device to create a duplicate card, and then using that card to purchase goods.
- Internal fraud: This type of fraud is committed by employees or insiders who misuse company resources.
- Phantom fill-ups: Reporting a fuel purchase that never actually occurred is called a phantom fill-up, and fraudsters usually pocket the money instead of using it for fuel.
- Overcharging: This involves charging more than the actual cost of a service or product and pocketing the difference.
- Card not present (CNP) fraud: These are fraudulent transactions made without the physical card on hand, usually meaning fraudsters have stolen/obtained card information by malicious means.
- Multiple transactions: Several transactions made in quick succession may be a sign that a fraudster is attempting to maximize the use of a stolen or cloned card before you flag it as suspicious.
Some of these signs and signals of fraud are easier to catch than others. You need strong internal controls to prevent fraud. Some examples of internal controls are:
- Tools for regularly monitoring transactions
- Robust training programs to educate employees about proper card usage
- Telematics tracking technology to bring data and insights under one roof
Explore this comprehensive fraud prevention white paper today
Learn how fuel controls and a closed-loop payment system can help your business prevent fraud
How has AI impacted fraud numbers?
Phishing attacks have gotten more sophisticated with the advent of AI. Since the fourth quarter of 2022 when ChatGPT launched, there’s been a 1265% increase in malicious phishing attacks.
AI has removed some of the barriers to entry for phishing. You don’t have to be a native English speaker, or understand the economy that you’re operating in to commit fraud. You can ask AI questions, and it will generate an email or a phone call or text message, and not only generate it, but also perform the fraudulent activity for you.
There are more phone-based phishing schemes now where AI is making the phone calls. Before generative AI, if you had an offshore fraud team, this kind of activity was not possible. Now it is. The AI voice is so good that criminals can start collecting information over the phone from unwitting customers.
Account takeover through phishing and social engineering is one of the biggest risks in the fraud space today.
What are the numbers when you consider fraud as related to commercial vehicle management?
If you’re running a 1,000-vehicle fleet with $5M in annual fuel spend and a $10M total operating budget you could be losing $500k annually to fuel theft and misallocation. This is from drivers filling up personal vehicles or misreporting fuel use. This number is based on 10% of your annual fuel spend.
You could be losing $600k annually to fraudulent transactions like card cloning, skimming, or unauthorized use by criminals outside your business intent on stealing from you. This is assuming fraud hits 12% of your $5M fuel budget.
$2.2 million annually is tied to theft and fraud across fuel, maintenance, and other operational costs. This is based on 22% of your $10M fleet operating budget.
The consequences of fleet fuel card misuse and fraud
Fuel card fraud and misuse can significantly impact an organization and cause substantial financial losses and operational challenges. Some of the most challenging or damaging aspects of fuel card fraud include:
Financial loss
With annual fraud losses totalling over $16 billion in 2024 – a 33% increase year-over-year, fleet businesses can save money by addressing fraud head on. Implementing controls and processes dedicated to fraud awareness and prevention is a good first step. Take Shell, for example, which has a whole team dedicated to fraud detection and prevention. The company estimates that this team is responsible for saving them about US $4 million annually through fraud prevention measures.
Reputational damage
An organization’s reputation banks heavily on its ability to establish and maintain trust with customers. Repeated incidents of fraud or theft can signal vulnerability. This not only puts you at risk of losing customers whose trust may begin to wane but can also act as a beacon for other thieves or fraudsters who may think your business is an easy target.
Legal and regulatory consequences
Non-compliance with fuel card regulations can lead to both legal and financial penalties. In some cases, organizations may even be held liable for fraudulent activities.
Data security risks
There is typically lots of sensitive financial information stored on a fuel card. Once compromised, fraudsters can use that data to commit further crimes.
Common weaknesses and vulnerabilities that lead to fleet fuel card fraud
Before implementing preventative measures, business owners should assess their fleet’s vulnerabilities and get a complete understanding of where there may be opportunities to increase security measures.
If you’ve never done something like this before, start with a comprehensive audit of all fleet activities, evaluating your current security measures, identifying weak points in the fleet management process, and recognizing signs of potential security breaches. By understanding where your fleet is most vulnerable, you can develop targeted strategies to enhance security across the organization.
Lack of control over fleet card usage
Without proper oversight, employees may have access to fleet cards they don’t need or may use them for personal vehicles. Additionally, if cards are not quickly deactivated when employees leave the company or change roles, those cards could prevent risk for further misuse.
Inadequate monitoring and reconciliation of fuel transactions
Without regular reviews of fuel purchases, it becomes easier for discrepancies and unauthorized fuel theft to go unnoticed. Moreover, if fuel receipts are not consistently collected and cross-referenced with card statements, it can be challenging to detect fraudulent activity.
Outdated or ineffective security measures
Stay up-to-date on the latest security tools to protect your business. As technology progresses, so do fraudulent practices. Thieves are always innovating—even alongside the most modern and robust security tools—to get around the latest preventive measures. For instance, if your fleet cards lack chip technology or if you’re not using secure payment terminals at fuel stations, you increase the risk of card skimming and data breaches.
How to catch and/or prevent fraudulent activity
There are lots of effective ways to reduce your fleet’s exposure to fraud risk, manage risks that seep through, and mitigate future instances, including everything from technology implementation or upgrades to employee training.
WEX fuel cards provide protection from fraud. In one recent 60-day period, less than one basis point of total transactions were confirmed as fraudulent. In the same time period, WEX’s AI-driven systems helped customers stop 32% more fraudulent transactions and reduce fraud losses by 25% compared to our non-AI driven systems.
Use technology to monitor actions and mitigate risk
Technological solutions like telematic systems, electronics loading devices (ELDs), and fleet management software are highly useful for monitoring your commercial vehicle use and fuel consumption in real-time to detect suspicious activity. Additionally, physical security measures such as GPS tracking devices, alarm systems, dash cams, and steering wheel locks can deter theft and aid in the recovery of stolen vehicles.
Provide ongoing employee training
Educating employees on proper card usage and how to recognize suspicious activity such as unauthorized purchases or multiple transactions, creates a staff better equipped to report issues promptly.
Training also reinforces ethical behavior, which can help reduce the likelihood of internal fraud. By becoming and staying informed, employees can act as a frontline defense against fraudulent activities, ensuring that fuel cards are used responsibly.
Foster a culture of security and accountability
Trust and safety are the key to long-term fleet protection. Start by clearly communicating with employees your company’s security policies and expectations. You can do this by providing comprehensive training on security best practices. During this training, emphasize the importance of their role in maintaining a secure environment. Your employees should know how to identify and report suspicious activities, how to properly handle sensitive information, and the consequences of security breaches.
Encourage open communication and transparency for employees with security concerns. Employees should feel open to report any security incidents or potential vulnerabilities without fear of retribution, so establish communication channels—anonymous surveys are one great way to allow employees to communicate concerns. Actively listen to their feedback and address any issues promptly, demonstrating your commitment to prioritizing security within the business.
Lastly, lead by example by consistently showing compliance with security protocols. Incentivize good behavior by recognizing and rewarding employees who lead others on security best practices.
How Hammer Construction took control of its expense tracking to detect and mitigate fraud
Over the years, Hammer Construction has faced several fleet management challenges. These include fuel theft and mismanaged expense tracking. Its fleet of vehicles are scattered across hundreds of miles in the U.S. and employees often work off-site for weeks at a time. Both of these factors made expense management difficult. Unfortunately, the company noticed a trend of internal fuel theft resulting in a loss of $500 to $700 a month.
To mitigate this, they needed a solution to help enhance employee accountability and gain better insight into fleet expenses. With the help of WEX’s fraud protection tool, ClearView, Hammer Construction was able to quickly identify trends and patterns, monitor purchasing behavior, and implement corrective actions to improve fleet operations.
The user-friendly nature of ClearView allows fleet managers to gain a clear understanding of complex data, helping them make the most informed decisions for their business.Through the ClearView dashboard, Steve Doss, Cost Control Manager at Hammer Construction, can easily examine fleet card usage in any region, department, service station, or even by employee or vehicle. That level of visibility and control has allowed him to not only improve fleet card efficiency and expenses but also transform employee mentality and accountability about fuel card usage.
“ClearView gives us the ability to quickly identify trends and patterns and eliminate the extra risk of theft. Driver mentality has changed from, ‘They will never miss a few gallons here or there.’ Or, ‘That’s just one of the perks of the job.’ To, ‘I better not steal any fuel because (Johnny) was terminated for using the fuel card for his personal vehicle.’” — Steve Doss, Cost Control Manager at Hammer Construction.
Along with increased fleet card protection, WEX ClearView helped Hammer Construction access insights that gave them a clearer picture of their business and, ultimately, achieve sustainable growth.
Learn how Hammer Construction reduced fraud for their business
Minimize fraud risk and operate with confidence
WEX speaks the language of small business operators. Whether you’re looking to modernize your insight and reporting efforts, save on fuel costs or take advantage of the latest GPS tracking technologies, WEX offers solutions to simplify the business of running a business. To learn more about WEX, a dynamic and nimble global organization, please visit our About WEX page.
Learn more about fleet management tools and best practices:
- Fuel card fraud prevention
- Fleet cost savings
- Safety on the road
- Grow your business with the best fuel card provider
Source:
Fleet Owner
Fleet Maintenance Magazine
Editorial note: This article was originally published on February 28, 2024, and has been updated for this publication.