Beyond Carnaval: How Fraud Catalyzed The Birth Of This Traveltech
Concise reflections, digests, and highlights of the week's significant news within Brazil's investment and innovation landscape.
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IN TODAY'S BEYOND CARNAVAL:
The Hidden Car Rental
Corporate Travel Fraud in Brazil: Cultural and Structural Factors
Inefficiencies Add Up As Much As Frauds
The Global Scope of Corporate Travel Fraud
The Hidden Car Rental
This is the story of Amanda (fictional name), who worked as a secretary at a shoe company that grew rapidly over five years, expanding from 25 to 120 stores. With that kind of growth, the demands on the company’s operations skyrocketed, especially when it came to employee travel. The travel budget, which used to be around R$ 10,000 (~$2,000) a month, ballooned to BRL 150,000 (~$3,000) as more and more employees had to travel to support the expanding business.
The company’s internal processes couldn’t keep up. Employees started facing long delays, sometimes waiting months to be reimbursed for flights, hotels, and meals. It got so bad that many of them had to use their own credit cards or even take out loans to cover work expenses, just to keep their personal finances afloat until the company finally paid them back.
As if the chaos wasn't big enough of a problem, amidst all this mess, Amanda noticed a big loophole. The finance team was so overwhelmed trying to process all the expense reports that they couldn’t properly review everything. She decided it was a good idea to rent a car for her personal use and charge it to the company’s travel budget. She quietly kept this up for an entire year. The rental costs were buried within the deep sea of travel expenses, and nobody noticed. The company ended up paying around R$60,000 (~$12,000) for Amanda’s personal car rental. Isn't that great?
This kind of fraud only went on (unnoticed) because there were simply too many transactions for anyone to catch it.
That's a true story, and only one that was discovered among many others that keep happening - maybe to a company you know, or even within your own company.
That story happened at a company where Marcelo Linhares used to work. Seeing with his own eyes how mismanaged travel expenses could get, Marcelo was inspired to start Onfly, a traveltech focused on helping companies take control of their business travel.
Corporate Travel Fraud in Brazil: Cultural and Structural Factors
We decipher Brazilian potential for global investment. And despite our optimism in the individual efforts and results of entrepreneurship and (mainly) private sector innovation, we tell it like it is.
Brazil presents a unique case in corporate travel fraud, driven by a mix of cultural norms and structural inefficiencies. Brazil scores quite low compared to the U.S., the U.K, and France on the Corruption Perception Index (CPI), a global corruption ranking that classifies countries from 0 to 100 for the level of corruption cleanliness:
Yes, Brazilians' perception of corruption scores low, and there are many ways in which this is reflected in our society. You have to take into consideration, though, that frontier countries like Brazil face numerous political and economic instabilities that lead to bad behavior - from the less to the more financially fortunate.
With inflation periodically surging and wages stagnating, employees, in some cases, feel pressured to supplement their income through small-scale fraud, like padding travel expenses. In 2023, Brazil’s inflation rate fluctuated between 4% and 6%, affecting purchasing power and contributing to financial stress. For employees facing financial strain, minor acts of fraud—like inflating their actual expenses—can be rationalized as necessary to "make ends meet."
Not to mention the tax regulations and other complex regulatory frameworks Brazil faces. These factors create operational inefficiencies that fraudsters can exploit.
For example, varying regional tax regulations and compliance requirements often lead to inconsistent expense management practices across different offices. Companies frequently struggle with maintaining consistent compliance standards due to these structural challenges, leading to gaps in oversight and increasing the likelihood of fraudulent claims.
According to a World Bank report, Brazilian companies spend an average of 2,038 hours annually to comply with tax regulations, placing Brazil at 181st out of 190 countries in terms of tax compliance burden. This is the highest number of hours reported, with only a few countries, such as Nigeria and the Republic of Congo, ranking lower.
As a fair comparison, these are the hours other frontier markets spend complying with regulatory measures:
Bolivia: 1,025 hours
Mexico: 291 hours
Chile: 286 hours
To be fair to Brazilians, corporate travel fraud goes way beyond Brazilian borders and the "jeitinho brasileiro" (a pejorative term to describe how Brazilians find loopholes in norms and laws).
Corporate travel fraud is a widespread issue impacting businesses globally. In a study by the ACFE travel expense fraud costs a median of $40,000 (~R$200.000) annually for a company of any size. The fraud frequency for large businesses reaches 11% of all fraud cases, and 21% for businesses up to 100 employees. The bad part is that those travel expenses take 12 months to be discovered, generating unaccounted costs of opportunity for non-returned cash.
Inefficiencies Add Up As Much As Frauds
For a real-life example, we brought the case of Rofe Distribuidora, a leader in construction materials in Northern and Northeastern Brazil, who struggled with chaotic travel management as the company expanded rapidly. With a growing sales team frequently on the road, traditional booking processes were inefficient, requiring hours to complete even a single trip. Managing expenses was equally frustrating, with manual processes causing delays and a lack of visibility.
To address these issues, Rofe adopted Onfly’s platform. Before Onfly, employees would spend up to 4 hours managing a booking process. Now, the average time to book a trip is reduced to just 12 minutes. Policies are pre-set within the platform, automatically flagging any bookings outside of guidelines. If an exception is needed, it routes directly to a manager for approval.
Implementing Onfly wasn’t without challenges. As Kenney Liberato, Rofe’s Supply Chain Administrative Assistant, notes, the change initially met resistance due to the learning curve. However, the intuitive interface, along with dedicated customer support, quickly won employees over. The platform made it easier for staff to request, approve, and organize travel, eventually embedding itself into Rofe’s routine operations.
Onfly’s detailed reporting tools, such as Travel BI, enabled Rofe to track spending patterns and identify areas for further savings. The centralized data made decision-making more straightforward and evidence-based, reducing errors and offering a complete view of travel costs. With fraud reduced by tighter controls and automated compliance checks, Rofe’s finance team could operate more efficiently.
The shift enabled by Onfly not only saved Rofe time and money but also simplified processes, improved compliance, and created a smoother workflow across departments. The success of this integration reflects how combining the right technology with clear policies can lead to substantial improvements in both efficiency and cost management.
Make sure you go check out Onfly's website if you're in need of a platform that will make your travel process chaos seem like a thing of a long time past. They're only one of many examples of companies using tech within a traditional and non-obvious sector to make people's and businesses' lives easier.
LAVCA Tech Brasil 2024: The annual LAVCA Tech Brasil event will be held in São Paulo on August 21, 2024, gathering VCs and tech investors. It will feature keynote chats, breakout sessions, and networking to foster relationships among Brazil-focused investors. (Source)
Sankhya Acquires Vixting: Sankhya, an ERP provider, has acquired Vixting, a startup specializing in HR solutions, marking another step in its M&A strategy to enhance its offerings. (Source)
Gabriel Galípolo Nominated: Brazilian President Lula has nominated Gabriel Galípolo as the new President of the Central Bank, signaling potential shifts in monetary policy. (Source)
Kinea's Major Bet: Kinea, the investment arm of Itaú, identifies the agribusiness sector as Brazil's most promising, emphasizing its strategic focus on this area for future investments. (Source)
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Every Thursday 06:09 am (BR time), the Beyond Carnaval newsletter offers concise reflections, digests, and highlights of the week's significant news within Brazil's investment and innovation landscape.
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