Overlooking Payroll & Expense Frauds in Your Company? Learn How Loopholes Led to a ₹18 Crore HR Fraud in Shanghai
In a shocking case of payroll fraud, a human resources manager in Shanghai orchestrated an elaborate scheme to siphon off ₹18 crore (16 million yuan) by creating 22 fake employees. The story, which recently went viral, serves as a stark reminder of the vulnerabilities in payroll systems and how easily they can be exploited if proper safeguards aren’t in place.
The HR Fraud Scheme Unfolds
Yang, the accused HR manager, worked at a labor services company that managed payroll for a tech firm in China. With sole control over employee placement and no salary review process to check his actions, Yang found a loophole in the system that he exploited for personal gain. He first created a fictitious employee, “Sun,” and applied for salary payments in Sun’s name. Instead of directing the salary to Sun’s account, Yang rerouted the funds to a bank card under his control, which was not registered in his name.
At first, the fake employee was invisible, and no one raised an eyebrow. However, over the next eight years (from 2014), Yang fabricated records for 22 ghost employees and pocketed their salaries and severance pay, all while his employer remained oblivious. The scam went undetected for years, thanks to the absence of a system in place to verify employee existence and attendance.
Uncovering the Shanghai HR Fraud
The scheme eventually came to light in 2022, when the tech firm’s finance department noticed a strange anomaly. One of these phantom employees, “Sun,” had perfect attendance records and always received his salary on time — yet, no one at the company had ever seen him at work. This inconsistency led the company to report the matter to the authorities, which launched an investigation into payroll records and bank transactions.
The probe soon unveiled Yang’s elaborate fraud, which had been running unchecked for nearly a decade. Yang was arrested, sentenced to over 10 years in prison, and forced to return part of the stolen funds. The case made headlines and quickly became the subject of online discussions, with many pointing out the flaws in the labor service company’s payroll system that allowed such an audacious scheme to unfold.
A Warning to the Business Industry
This case underscores a significant issue in many organizations: the lack of robust payroll management and verification processes. Without proper checks and controls, employees in positions of trust can easily manipulate systems for personal gain, leading to devastating financial losses. In this case, the company had no procedures in place to verify the legitimacy of employees listed in the payroll system, which allowed Yang to operate unchecked for years.
But payroll fraud is just one aspect of the many challenges businesses face. Another prevalent issue is expense fraud — when employees submit fraudulent claims for expenses, leading to potential financial losses. Many companies struggle with validating and processing these claims, which often results in inefficiency and delays in reimbursement.
The Solution: Streamlining Payroll and Expense Processes with HRMS (Human Resource Management System) Technology
To avoid such fraud and inefficiencies, companies must implement automated, reliable HRMS (Human Resource Management System) solutions. A robust HRMS like Tankhwa Patra can ensure that every step of the payroll process is verified and automated, making it far more difficult for fraudulent activities to go unnoticed.
But it doesn’t stop at payroll. Tankhwa Patra also addresses the issue of fraudulent expense claims. Through its expense claim dashboard, employees must select relevant categories, provide clear remarks, and upload valid documents like invoices and bills to justify their claims. This creates an additional layer of verification, ensuring that only legitimate claims are processed. The system makes it easy for HR and finance teams to approve or reject claims based on clear, documented evidence.
By centralizing expense claims and verification within the system, Tankhwa Patra saves time, improves efficiency, and eliminates the risk of fraudulent claims slipping through the cracks. The automated process enhances company transparency and ensures better financial management across the board.
The Benefits of Automation with HRMS
With Tankhwa Patra, payroll management becomes a seamless, secure process. Features such as employee tracking, attendance management, expense management, payroll management, and many more ensure that all employees are accounted for and that discrepancies like ghost employees are immediately flagged. The system integrates biometric data and SMS notifications, making it easy to track employees’ attendance and activities in real-time, preventing fraudulent behavior before it can escalate.
Moreover, Tankhwa Patra allows for detailed reporting and auditing capabilities, so any unusual activities or discrepancies in salary disbursements are quickly detected. This automation reduces human errors, eliminates potential loopholes, and ensures that companies have full visibility into their payroll, HR, and expense operations. For organizations looking to streamline HR tasks, reduce administrative burden, and safeguard against potential fraud, Tankhwa Patra is the reliable solution that brings efficiency and transparency to every aspect of HR management. If you’re looking for a reliable HRMS solution, get in touch with us today to book a free demo and discover how Tankhwa Patra can enhance your company’s efficiency!
