DOCUMENTATION, SECURITY
AND MONITORING
CREDIT, ATM, and PREPAID CARDS
1.0 Introduction
1.0 Current lifestyles have made various types of prepaid cards [or plastic money] and cards used for financial transactions almost indispensable; cash transactions are fast becoming obsolete. Credit cards are being presented by Government to Government political leaders and senior management officials and also the Corporate Sector to its senior managers and Directors. The credit cards are issued to pay for several types of allowances, such as: entertainment, fuel for vehicles, travel tickets, hotel costs, etc. Credit cards are also becoming tokens of love expressed by spouses to each other, by parents to their children [and sometimes vice- versa] and also among lovers and mistresses. Credit cards have become one of the most prized perks, elevated to the level of status symbols, much sought after [the more the better] and displayed at every possible opportunity by the young and ambitious [the kiasu generation]. There all classes of cards; ordinary cards, the premier cards, the gold cards, the platinum cards and so on. The spending limit of each new card is raised and finally to the ultimate unlimited limit. Each new card is designed to entice and inflate the cardholder’s ego. Some cards are subject to an annual fee.
2.0 Any individual without a credit card is considered out of step with the times. This was appropriately illustrated by a situation in a mega mall. A shopper offered cash for purchases but was rejected by the young cashier and the graduate floor manager; they explained that they did not know how to account for cash as nobody had tendered cash in a very long time.
MONTHLY STATEMENTS
3.0 The credit card companies prepare monthly statements of purchases charged on the card and submit them to their cardholders. Copies of charged receipts are attached to support the debits raised in the statements. Cardholders are required to verify the debits with their own copies of the debits that they are given at the time of incurring the debt. Any discrepancy is to be reported to the credit card company immediately for rectification purposes. Similarly, card losses must be reported immediately to limit the cardholders’ liability. Failure in both cases can make the cardholder responsible for all charges shown in the statements, including charges raised after the cards may have been reported stolen.
4.0 Monitoring individual statements is simple but it must be done. Self-discipline is essential as members' copy of invoices must be retained for verification with the entries in the statements, when received, and settlement of charges raised. Possibilities of errors and fraud are minimized and easily detected during prompt compliance with the monitoring procedure. This is of particular importance where the debits listed in the statements are to be paid by persons other than the holder of the cards.
NON-VERIFICATION OF CHARGES
5.0 The most common form of credit card mismanagement is done by cardholders who do not have to settle the charges personally. These include directors and senior executives in the private and public sectors who are provided with credit card privileges as they are assumed to be trustworthy and responsible people. Their statements are not checked if the total payable is within expected limits and any small discrepancies may be overlooked as an error. The monthly charge statements of people holding position up to a certain management level may be subjected to all the monitoring and control procedures by the finance/audit [internal/external] departments. However, statements pertaining to top level management executives in the private sector [including CEO'S, MD'S, Directors, Heads of Departments, and High Achievers] and public sector [Government political leaders and top civil servants] may not be subjected to the same level of detailed checking. People whose statements are not subject to any monitoring and questioning would also include the loved ones [spouses, children and loves of heart/mistresses/secret marriage partners, etc].
6.0 It is of utmost importance that all credit card charges listed in statements be supported by documentary evidence that details the type of expense, be promptly checked in detail and in comply with established procedures and controls. In simple language, it means that the card holder be required to certify the accuracy of the charges raised in the statements and ensure approval of the relevant authority for charges, especially amounts beyond the approved purposes or limits. Failure to comply has adverse implications and can be detrimental to the individuals and the company or organization concerned. Some possible consequences with far reaching effects are listed below as examples.
[a] Spouses, children and loves of heart generally do not learn financial discipline and appreciate giver’s sacrifices. They can also develop bad/expensive habits and get into wrong company. A son purchased a diamond ring for his girlfriend and both had overseas holidays without the knowledge of the parent who was settling the bills but could do nothing as it was too late to avoid payment and found it very difficult to take disciplinary action. These could also result in fraudulent withdrawals, criminal activities and other activities that can result in break-up of families, social disgrace and ultimately financial ruin for individuals and companies. This would not apply to Government that has unlimited funds and the only recourse is disciplinary action against the person involved;[b] Corporate cardholders at management level could misuse the card for personal gain. A Project Director might purchase gold ornaments for his family and an overseas holiday all at company expense but the amount could not be recovered. The misused amounts need not be large in the initial stages but may escalate substantially if it is realized that prompt statement checking and charge monitoring is not practiced and that the prescribed internal controls are not being enforced. The consequences of credit card misuse could result in losses to the organization due to inability to recover the unauthorized charges and it could result in dismissal, disgrace, loss of retirement benefits, criminal action, or blackmail by some unscrupulous person who may be in the know and decides to do so. However it has been observed that in most cases action may not be taken to recover the fraudulent amounts for fear of bad publicity and reflection on the corporate governance of the company.
RECOMMENDATIONS
7.0 Individuals and corporate leaders responsible for ensuring compliance of controls and monitoring but overlook, weaken or neglect checking of the credit card statements for whatever reason, do a great disservice to themselves, the companies and the cardholders as it creates opportunities and possibilities for fraud. The best preventive action is to prescribe comprehensives and effective procedures and internal controls and then enforcing them in respect of all card holders, irregardless of position and status. All card holders should certify to the accuracy of the charges included in the periodical statements by ensuring that the statements are substantiated with documentation that is comprehensive, accurate and relevant to the company/Government.
8.0 The credit card is a great boon and of immense benefit for many individuals at every level of society and is indispensable in the corporate world and the public sector. One of the major benefits has been reduction of cash robberies and losses. It is expected to spread even more widely all over the world in the next millennium just as the paper currency spread in the last century. But like all good inventions, it is double-edged; it can do a lot of good if used with care but it can also spell financial ruin if abused and handled without proper controls.
Prevention of opportunities is the best solution. Any neglect of
the monitoring process can be a cause for regret. It can prove to be
financially disastrous. The responsibility is all yours.
My best wishes in the e-money age!
GSK/Dec 07
E-mail: gursharan38@gmail.com sharwant38@yahoo.com
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