Preventing Travel Fraudsters from Flying into the Sunset

The new communications tools of the information age haven’t replaced business and leisure travel. Despite e-mails and videoconferences, air travel continues to grow. Airplanes carry both good and bad passengers and all of their airline transactions are stored in computers of the airlines and their reservation systems. Let’s review how fraud examiners can inspect air travel records to find incriminating evidence that can help nail flying fraudsters.

You can obtain reservation details, ticket copies, or simple confirmation of electronic ticketing from your corporate travel agent or internal department, and frequent flyer (FF) information from airlines’ customer service departments. The airlines may cooperate with you, they may want to clear their actions with their legal staffs, or they may first want to speak to your attorneys. You may need to use a specific release signed by the traveler, courts orders, subpoenas, or search warrants. (In the United States, at the least, you’ll have to abide by the provisions of the Fair Credit Reporting Act.)

Tips on fraudulent activity can come from internal or external travel agencies, internal auditors or accountants, or from colleagues who have their suspicions.

Frequent Flier Records 

For the past 20 years, FF awards have become a staple of airline marketing. They boost customer loyalty for little cost to the airlines and identify and market those who fly a lot at full price fares. The airline systems already record who is on the plane. (However, this information isn’t always trustworthy. See the sidebar, “Miles and Much More,” at the end of this article. A FF system just adds FF numbers and keeps account of the accumulated miles. Since passengers prefer to use the same airline to maximize their FF credits, virtually every flight is noted. And passengers usually monitor the airline FF statements to make sure that all flights are credited to their award totals. Therefore, FF records contain a fairly dependable indication of actual travel and are more reliable than ticket copies which may have several changes in routing and flight times.

If the airlines cooperate, then FF information is available. Smart employers help their own investigations by including an audit clause and legal release into the travel expense reports that employees are required to sign, such as this:

“Travel expenses are subject to audit by [organization name] or its representatives, and I authorize release to [organization name] of any relevant information form any source such as airline records etc.” 

With such a release, you now need the traveler’s FF number for the airline records you want to probe. You obtain the FF number from ticket copies or from your company’s travel department records where it’s kept as part of the traveler’s profile. Two avenues open up for finding information from the FF records you obtain:
Actual Flights traveled: You’ll see which flights the travelers actually took, and can compare them to the claimed itinerary on their travel expense submissions.

Case: A traveler submitted an expense account for a flight and time spent in San Francisco for “official business purposes.” The travel accounts staff suspected that the air ticket copy wasn’t genuine. The investigation fount that, according to his favorite airline’s FF records, the traveler was on his way to Africa on another assignment on the same days.  

Award travel and other benefits: The airline records will show any free flights and upgrades the traveler received, and can help you determine whether the traveler “double-dipped” by charging the organization for the award travel. The computer printouts may be hard to decipher because of special airline codes; you’ll probably need to ask for an interpretation from a travel agent or the airline’s FF customer service department.

FF information is usually updated promptly with flight credits for the airline itself, but partner information from associated airlines, car rental companies, credit card issuers, and hotels often take months to record.

Airline Reservations Systems 

Airline reservation systems contain a treasury of investigative information for the fraud examiner. The popular SABRE system which your corporate travel agent may use, keeps records of the progress of each reservation as well as itineraries and billing information. The language is cryptic and you may have to print the information from microfiche but the essential facts are there. Even the dialogues between the reservation agent and the traveler are frequently documented as an outline. In addition, the travel agent’s accounting department has copies of issued tickets. (Again, you may need the permission of the courts to retrieve these records unless you have the traveler’s release on the expense report.)

Case: An expatriate employee was entitled to periodic payments for airfares to visit his home country, provided he submitted some type of documentation showing that tickets had been purchased. He chose to provide “voided tickets” (see the next section) for reimbursement of expenses for a home country trip for himself, his wife, and their children. However, an investigator found – from travel agent accounting records – that the mother was traveling on a company-paid, work-related ticket in higher class than the one quoted on the tickets. From comments in the SABRE reservation dialogue, the investigator found that one child traveled on a free award ticket while the parents fraudulently claimed expenses for a paid ticket for the child.  

Voided Tickets 

For a small bribe from a flying fraudster, a travel agent can completely fake a ticket with a passenger receipt copy. Despite computer-printed tickets and ticketless travel, an agent still has the option to create and use a fully manual ticket. In his office he uses metal plates officially issued by the airlines to imprint the names and codes of the airlines and the agent on authorized blank tickets with pre-printed numbers. The agent writes by hand an itinerary quoting valid flights but without making any reservation in the airline’s system. Thus, the agent creates a perfectly legal ticket without using the airline’s advanced technology.

The crooked agent, with little fear of detection, voids the flight coupons produced by this legitimate process and delivers the passenger receipt to the traveler. The traveler presents this receipt to his company as proof that he bought the ticket but no money changed hands – except for that small kickback to the agent.

“Voided tickets,” as they are called in the industry, present several red flags for potential fraud. Payment is usually by check or cash to avoid documentation and the fee of a credit card transaction. The physical ticket copies look and feel unused; they don’t have luggage coupons attached, and no one wrote the seat number or number of pieces and the weight of luggage on them.

Verification of Ticket Use 

An airline’s accounting systems can tell whether a ticket – identified by its 13-digit number – was paid for, presented for travel, or was refunded. The airline always records a presented ticket. However, some airlines often can’t find tickets older than one year and, in this age of cost cutting, airline accounting staffs often are overworked and aren’t able to take the time to help.

The Airline Reporting Corporation (1530 Wilson Blvd., Arlington VA 22209-2448) maintains an inventory of ticket numbers issued to travel agents. If the airline has no record of the ticket, they can supply the name of the travel agent to which the ticket number was issued and whether the agent reported a ticket as sold.

If you’re investigating travel fraud, it pays to use the resources of the specialists in your organization’s travel office or the outside travel agent working for your organization. With the cooperation of the airlines and some diligent and logical work based on the appropriate release or permission from the courts, you can use the tools that the airline industry maintains for its own operations. You can inexpensively obtain convincing evidence that can help you ground flying fraudsters.

Karl Krueger, CFE, is an independent consultant in Melbourne, Australia.  

SIDEBAR 

Miles and Much, Much More 

The German news magazine, “Der Spiegel,” reported in its August 23, 1999 issue a case of embezzlement of frequent flier (FF) miles in Munich. A 31-year-old manager with a well-paid job was indicted for obtaining fake FF miles from four airlines. He said the deception became a sport and hobby for him and he enjoyed the challenge of inventing ways to earn more miles. Of course, he also liked the free leisure travel and other perks as a privileged FF. This case shows how frail human nature and frivolous fraudulent activities can damage a promising career.
The traveling fraudster would buy a ticket, check in, and obtain a boarding pass but then wouldn’t board the plane. He could then claim the miles on full-fare tickets. On various occasions, he would check in many times with the same tickets and would eventually return them to the airline for credit. (Tickets are no longer reissued for a flight date change.) He would use the unused boarding passes to later claim mileage credit from the airlines. The lack of controls in the airline systems allowed the 38 alleged cases of fraud, which netted him hundreds of thousands of bogus miles. Four out of the five airlines he tried didn’t properly check his claims for miles based on boarding passes he submitted; only Swissair disallowed his mileage claims. In one case, the fraudster didn’t even have to provide ticket copies. He only was caught when he played the game too often and the vigilant manager at the Munich airport discovered his scheme and alerted local authorities.