Fraud can drain an organization’s coffers dry, and for controllers, it’s your job to know what’s happening and stop it. While a traditional fraud-fighting initiative may have worked in the past, the past six months have changed the tactics and processes needed to detect, investigate, and ultimately fight it.
Though we did note the potential impact of work from home orders in our article exploring ongoing fraud risks, a new report from the Association of Certified Fraud Examiners doubles down on these findings. Their report, titled Fraud in the Wake of COVID-19, highlights the continued efforts needed to stop fraud in a new business landscape.
The second of its kind, this survey garnered responses from thousands of business leaders between late July and mid-August 2020 to gauge how the continued effects of lockdown continue to unfold for organizations around the world.
77 Percent See Increase in Fraud during Pandemic
The longer that people are forced to stay home, the higher the risk of fraud. This should come as little surprise—and 77 percent of respondents have witnessed an increase in the overall level of fraud.
According to the study,
“As of August 2020, 77% of respondents said they had observed an increase in the overall level of fraud, with one-third noting that this increase has been significant. The observed level of fraud has grown since our May 2020 study, in which 68% of respondents had seen an increase in fraud, with one-quarter observing a significant increase.
Our findings indicate this uptick is likely to continue; 92% of respondents expect to see a further increase in the overall level of fraud during the next year, and nearly half expect that increase to be significant.”
Working from Home: The Convergence of Means, Motive, and Opportunity
Fraud is the convergence of means, motive, and opportunity, and the lockdowns have provided all three. For companies looking to stem the tied of fraud, it pays to identify the ways that COVID has facilitated fraud at an organization.
Means:
People are finding how things work during the lockdowns and getting to know the weak spots and areas with a concerning lack of oversight. According to the report, many respondents are finding it harder to prevent, detect, and investigate fraud.
“More than three-quarters indicated that preventing fraud is more challenging in the current environment, with 26% noting that it is significantly so. Similarly, 74% of respondents have found investigating fraud more difficult (31% significantly more challenging), and 68% have found fraud detection more difficult (21% significantly more challenging).”
Motive
Whether it’s in the form of pay cuts, hours cuts, or trouble at home, motive might come in a variety of ways. Lockdowns have resulted in increased drinking and have created family problems, two of the common fraud signs mentioned in our face of a fraudster article.
Opportunity:
Especially for those companies with manual and disconnected processes, it’s easy for an employee to sneak money out and hide the trail. This, according to the ACFE report, is driven by the physical restrictions placed on organizations. Respondents cited inability to travel, issues with conducting remote interviews, and lack of access to evidence as their top difficulties holding them back, meaning that fraudsters may feel a bit more flexibility.
Pair this with not seeing people face to face, and it might be just enough of a disconnect for the potential fraudster to turn into a threat.
New Tactics: How Internal and External Threats Have Changed
While the overall level of fraud has increased in the wake of COVID-19, certain types of fraud are presenting more pervasive risks to organizations than others. What was once driven by corruption, billing fraud, and check tampering has shifted to a landscape driven by cyberfraud.
“As in our May 2020 study, cyberfraud (e.g., business email compromise, hacking, ransomware, and malware) continues to be the most heightened risk for organizations, with 83% of respondents already observing an increase in these schemes and 90% anticipating a further increase over the next year. Other significant risks in terms of both observed and expected increases include unemployment fraud, payment fraud (e.g., credit card fraud and fraudulent mobile payments), and fraud by vendors and sellers (e.g., price gouging, product misrepresentation, and overbilling).”
Keep ahead of the Challenges: Join the Controllers Council Today!
Fraud can kill your organization—and anyone can be responsible. Though the aforementioned demographics and tactics can point you in the right direction, this is by no means the only way fraud happens.
As a controller, it pays to remain vigilant and stay ahead of your responsibilities. We launched the Controllers Council to help you stay up to date with all the latest news and advice, offering not only tips for leadership, but networking and discussion opportunities as well. Get to know more about the benefits of joining.
Additional COVID-19 Resources
Six Key Metrics to Track as You Pivot from Lockdown to Recovery (Part 1)
Pandemics and Paper Checks: A Pressing Threat for Businesses
