The holiday season brings gift-giving, celebrations, and a spike in business travel as teams race to close out the year. It also creates conditions that make expense fraud more likely: financial pressure, distracted approvers, and higher volumes of legitimate claims to hide behind. After reviewing millions of expense lines across industries, I’ve seen the holiday period quietly become one of the riskiest times of year for fraud. Understanding why this happens and how AI is changing the way finance teams minimize that risk can help business leaders protect their organizations during the most vulnerable time of year.
Timing matters more than ever today. Workers globally, even those in resource-rich countries like the United States, are navigating a particularly challenging economic moment. That context is shaping fraud risk in ways that demand attention.
The perfect conditions for a storm of holiday fraud
To understand the psychology behind these events and why otherwise honest people commit fraud, we examined criminologist Donald Cressey’s Fraud Triangle. His research identifies the three key conditions making up that triangle:
- Pressure: The personal or financial stress someone feels
- Opportunity: The chance to get away with a violation without being caught
- Rationalization: The story people tell themselves about why what they are doing is acceptable.
During the holidays, all three intensify simultaneously. When that happens, even normally honest employees can make poor decisions.
Financial pressure peaks
Employees face gift-buying expectations, travel costs to visit family, and credit card bills from Black Friday purchases. Consumer credit card debt recently hit record levels, and a significant share of Americans still carry debt from last year’s holiday season. Groceries and everyday essentials cost noticeably more than they did just a few years ago. Nearly 80% of Americans have less than $1,000 set aside for holiday spending, and more than one-third are still carrying debt from last year’s holiday season. Someone who would never consider padding an expense report in March might see things differently when December credit card statements arrive.
Opportunity expands
Finance teams are stretched thin, rushing to close books before year-end. Managers approve expense reports with less scrutiny because they’re juggling holiday schedules, vacation coverage, and fourth-quarter targets. The volume of legitimate expenses also surges, from holiday client dinners to team celebrations to increased travel, making anomalies harder to spot in all the noise.
Rationalization comes easily
Thousands of companies announced layoffs this year, and roughly one in three workers reported concerns about job security (Clarify Capital survey, 2025). Many employees feel undervalued or anxious about their futures. “The company doesn’t care about me, so why should I care about their rules?” becomes an easier mental leap, a thought pattern that can lead to small violations that escalate over time.
What holiday expense fraud looks like
Certain fraud schemes line up naturally with holiday conditions. I’ve seen personal purchases, such as presents of toys and candy, submitted as client gifts. Without verification, a $200 purchase at a department store looks identical whether it’s going to a key account or to Aunt Margaret. A team holiday dinner for eight becomes a dinner for 12 on the receipt. A family holiday meal gets resubmitted as a client entertainment expense. Receipt manipulation has become more sophisticated, thanks to free online tools and AI-generated image editing that can alter dates, amounts, and vendor details in minutes.
Travel expense fraud increases as employees add personal days onto business trips. A conference ending on December 18th becomes a convenient jumping-off point for holiday travel, with the extended hotel stay and changed flights buried in legitimate business expenses.
Perhaps most concerning is the rise of entirely fabricated receipts. A quick web search reveals multiple sites dedicated to generating fake receipts that look authentic, with realistic formatting, tax calculations, merchant details, apparent food stains, and paper wrinkles. Traditional review processes catch almost none of them. We are now in an “AI versus AI” environment, where employees use generative tools to create convincing fake documents in seconds, and only an equally capable AI can help a finance team detect them.
Why traditional approaches fall short
Most businesses rely on policy documentation and human review to catch expense fraud. Neither works particularly well, especially given the latest tools and AI-generated fakes. Both fail even more dramatically during times of high-volume report submissions.
Policies define what’s allowed, but they don’t always detect violations. Knowing that personal gifts aren’t reimbursable doesn’t help when a receipt simply says “gift” with no indication of the recipient. Human reviewers can spot obvious problems, but they can’t cross-reference a receipt against every previous submission in the system to catch duplicates, verify that every restaurant on every receipt actually exists, or detect the subtle signs of image manipulation.
The math works against manual review. A company processing numerous expense reports per month cannot realistically examine each one thoroughly. Reviewers develop shortcuts, such as checking that totals match, glancing at receipt images, and approving anything below a certain threshold. Fraudsters learn these patterns quickly. At a scale of tens of thousands of line items each month, even a small percentage of missed violations can add up to significant losses.
AI changes the equation
Artificial intelligence looks at expense audits differently than people do. Rather than sampling transactions or setting simple thresholds, AI-powered expense audit tools act like tireless digital coworkers embedded in your workflow. They can examine every expense report in real time against the complete historical record. This is important because many fraud patterns only become visible at scale.
Modern AI detection catches schemes that would be impossible for human reviewers to identify, like duplicate receipts submitted months apart, receipts with metadata that doesn’t match the visible content, spending patterns that deviate from an employee’s established baseline, and merchants that don’t exist at listed addresses. These patterns emerge only through systematic analysis that AI makes practical.
As I see it, the goal isn’t to create a surveillance culture or assume the worst about employees. Most people don’t commit fraud. But businesses have a responsibility to maintain controls that are actually effective, and the holiday season can test those controls more than at any other time of year.
How to combat holiday expense fraud (and prep for next year)
The most effective fraud prevention combines smart technology with a supportive culture. Being proactive is important—don’t wait until after violations occur. Before the holiday season, remind employees about the most relevant expense policies in clear, practical language and share a few real examples of what is and is not acceptable. Make sure employees know that expenses are systematically reviewed. The goal is not to threaten them, but to remove the opportunity element of the Fraud Triangle.
Consider whether financial pressures within your company might be creating unnecessary risk. Are expense reimbursements processed quickly, or do employees wait weeks for money they’ve already spent? With so many workers stretched thin by rising costs and economic uncertainty, delayed reimbursements add real stress. Is holiday spending for legitimate business purposes adequate, or are employees pressured to cover costs themselves?
During the season, use AI-based review to look at every line item, not just a sample, and pay particular attention to categories like gifts, meals, and travel extensions around key dates. Make it easy for managers to see which expenses were auto-approved based on policy compliance and which were escalated by AI for a closer look.
Our customers who strengthen their controls during the holidays find it easier to maintain protections the following year. The systems you set up now to cover compliance weak spots during this busy period help you improve policies and employee training going forward.
Ultimately, catching fraud early creates better outcomes for everyone. Small policy violations that are fixed quickly are unlikely to escalate. But larger-scale fraud, discovered after months or even years, typically ends careers and results in legal action. Neither the organization nor the employee benefits from detection that’s too late for intervention.
The holidays should be a time of celebration, not a season for expense fraud. With the right systems and awareness in place, they can be.
Anant Kale is the CEO and co-founder of AppZen, the leader in autonomous finance operations, providing enterprise-grade agentic AI for finance teams at Fortune 500 corporations and global companies, including Amazon, Novartis, Salesforce, and Boeing. Customers rely on its finance AI to help transform their travel and expense, corporate card, and accounts payable processing into autonomous finance operations.
AppZen processes millions of transactions globally, delivering unprecedented efficiency, accuracy, and compliance for its customers.
Photo courtesy Nataliya Vaitkevich via pexels
