The coronavirus pandemic is unprecedented in many ways and we are already seeing its impact. As the president and chief executive of the Association of Certified Fraud Examiners (ACFE), the world’s largest anti-fraud organisation, I know that during times of chaos and uncertainty, fraud increases so organisations need to brace themselves.
Two of the biggest challenges organisations will face in the wake of the pandemic are an increase in attempted fraud, from both insiders and outside parties, and mounting hurdles that prevent anti-fraud professionals from doing their job to the greatest effect.
There are many reasons fraud proliferates during times of economic instability. One factor is the increased pressure companies and their employees feel as they struggle to meet the challenges of a down economy. For example, struggling companies can face pressure to falsify their financials to meet earnings targets or secure financing.
Barriers to anti-fraud adoption
Economic pressure also affects a company’s employees and can make the company a target. In times of economic crisis, employees might face salary reductions, potential furloughs or loss of a partner’s income.
When employees’ personal financial pressures rise, they may be more likely to steal from their employers. The ACFE’s 2020 Report to the Nations shows 42 per cent of occupational fraudsters are living beyond their means and 26 per cent are experiencing financial difficulties at the time they commit fraud.
Outside fraudsters also see instability as opportunity. According to data in the ACFE’s Fraud in the Wake of COVID-19: Benchmarking Report, 81 per cent of anti-fraud professionals surveyed in May 2020 have already seen an increase in cyberfraud, such as business email compromise, hacking and ransomware, with 45 per cent saying this increase has been significant.
The COVID-19 pandemic has resulted in several circumstances that cybercriminals seek to exploit. Many employees have been working from home and their home networks may not have the same robust cybersecurity controls as their office.
How COVID opened the door for fraud
Also, with operational changes and disruptions due to the pandemic, phishing attempts might not seem as out of the ordinary as they would during a normal time, leaving potential victims’ guard down.
Many rules put in place by governments around the world to limit the spread of COVID-19 have affected travel and limited the ability to have in-person meetings. While these measures were necessary to halt the spread of the virus, they also present unique challenges to anti-fraud professionals.
In the COVID-19: Benchmarking Report, 74 per cent of the anti-fraud professionals surveyed said investigating fraud is more challenging in the wake of the pandemic. Specifically, the respondents cited the inability to travel (38 per cent), lack of access to evidence (32 per cent) and difficulties in conducting remote interviews (28 per cent) as some of the top challenges in combating fraud in the current environment.
At the same time, organisations that are struggling to remain profitable in unstable economic conditions may seek to cut costs and could target departments like compliance and internal audit. This is a mistake. The Report to the Nations shows organisations that fail to invest in internal controls experience significantly higher fraud losses and take longer to detect frauds than those that have anti-fraud measures in place. I can confidently say now is the time for organisations to bolster, not cut, their anti-fraud controls.
Although business practices may not be top of mind while we navigate these difficult changes, I encourage organisations to look towards the future to protect themselves, and their employees, against fraud. Because it’s not a question of if we see more fraud, it’s a question now of how much we will see and how prepared we will be to address it.