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COVID-19: The potential of increased fraud and economic crime
Fraud is often at its most virulent during downturns and crises - both of which is happening with the COVID-19 pandemic.
The latest PwC Global Economic Crime and Fraud Survey 2020 told us that 47% of respondents experienced fraud in the last 24 months. However, this is expected to significantly increase. When pressures on people, companies, and the economy are greatest, there are pressures that motivate fraudsters to act. Disturbances in normal business processes, controls, and working conditions give malicious actors opportunities to commit fraud, while the chaos and uncertainty of the crisis enable many to rationalise bad behavior that might otherwise have been checked by ethical codes.
As leaders focus on stabilising their businesses, they should consider how fraud might penetrate their ecosystem, and strategise how to prepare for the disruption it brings — so they might emerge stronger on the other side.
Five steps to better fraud preparedness in the time of COVID-19
1. Prepare for extended remote working
It is unclear if more than half of all businesses are able to maintain critical operations despite office closures, social distancing and travel restrictions. The answer for many has been to transition very quickly to a remote workforce, using scalable remote access technology. You should provide your workforce with secure access to critical assets and applications to do their job effectively, while being alert to the additional threats of remote access. Integrate a strong security and privacy foundation so you can focus on maintaining critical business operations while mitigating exposure to fraud or compliance issues.
2. Educate your workforce on threats
Your employees are your first line of defence. According to PwC’s 2020 Global Economic Crime and Fraud Survey nearly half (43%) of reported incidents resulting in losses of US$100 million or more were committed by insiders. Times of stress call for reinforcing your code of ethics and rules — and reassuring workers of their value as anti-fraud partners. Double down on educating them about social engineering and email attack techniques. And if they are working remotely, make sure your people know what behavior is expected of them, and what resources are available to support them.
3. Communicate across your entire stakeholder group
Don’t stop with your employees. From your board, shareholders, business partners and regulators to the general public, it is critical to confirm all your relevant stakeholders are kept aware of perceived risks, prevention strategies and contingency plans — as soon and as specifically as possible. When asked in PwC’s 2019 Global Crisis Survey to name their area of greatest vulnerability in a serious crisis, over a third of respondents (38%) pointed to their communications with external stakeholders.
4. Keep an eye on your extended business partner network
Vendors, third parties and other business partners can be a stress point for fraud. PwC’s 2020 Global Economic Crime and Fraud Survey found that one in five (19%) respondents cited vendors/ suppliers as the source of their most disruptive external fraud. Can you identify and account for all your key third parties? How well-positioned are those third parties to continue to support your company’s fraud management efforts in a time of crisis? Are they financially strong enough to weather this storm? Can they provide ongoing maintenance and emergency response? And, if they can’t, do you have an alternative provider who can step in?
5. Sharpen your fraud detection
Frauds of a transactional nature — like customer fraud, cyber attacks and asset misappropriation — can be detected using fraud detection technologies that leverage advanced analytics. Yet, according to PwC’s 2020 Global Economic Crime and Fraud Survey, only a quarter of respondents (25%) are using artificial intelligence (AI) — a technology that is ever more prevalent today. It is a staggering statistic when you consider the magnitude of the fraud threat every organisation faces.
These tools have a clear return on investment (ROI) and offer a relatively cost-effective opportunity to upgrade your defences when it’s most needed. The changes in transactional patterns seen during the COVID-19 pandemic, such as the shift to e-commerce, also mean that existing fraud detection models may require recalibration to realign with the “new normal.” Recalibration can reduce the amount of false positive fraud alerts and increase the effectiveness of your fraud detection program.
Insights
To help you navigate the potential of increased fraud and economic crime through the COVID-19 pandemic, here you’ll find some relevant insights.
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