Fraud has been rising during the pandemic because organisations are distracted and not focusing on controls during a period where many staff are working remotely, according to a study.
Seven percent of executives taking part in KPMG’s Covid-19 Fraud Survey said they had already seen fraudulent or corrupt behaviour that they would attribute to COVID-19 era working conditions — and an overwhelming 83 percent believed their organisation was vulnerable to fraud taking place now.
“Nearly half of all respondents said their organisations’ ability to investigate fraud or corruption allegations was ‘significantly’ or ‘somewhat’ inhibited by the current circumstances,” the report said, which was conducted in Australia, “while almost a quarter revealed that anti-fraud prevention programs had been delayed due to the COVID-19 outbreak.”
Segregation risk
Financial controls are struggling to adapt to the mass remote working environment, it added. “Segregation of financial functions are vulnerable to override, the ability to verify if goods or services have been received is impeded and hasty system work-arounds to get things done are becoming more common,” it said.
As separate study by PWC agreed that COVID-19 has been a huge distraction for management and employees under remote working conditions
“Criminals use sophisticated analysis to seek out weak spots and will take advantage of flimsy controls and poor IT security,” said the firm. “One organisation we work with saw a 40% increase in attempted cyber attacks in the space of a week. We have also seen an organisation where external fraudsters have sought to exploit people working from home by impersonating senior people and instructing payments to be made.”
Not surprisingly, UK businesses have been turning to technology to help them combat fraud over the past couple of years. In PwC’s Global Crime Survey 2020: UK findings, 67% said they had implemented or upgraded technology to combat fraud.
Barriers
Barriers to successful implementation remained. Key blockers to using technology were cost, and a lack of the right management support, resources and systems. In the study 16% of UK respondents reported using AI in fraud prevention, up from just 9% in 2018. UK respondents’ intention to make future use of various types of alternative or disruptive technology and techniques in their control environments was higher than the global average.
“It’s clear that more can still be done to capitalise on the use of disruptive technologies and methods, such as machine learning and anomaly detection,” Fran Marwood, the firm’s forensics partner said.
To get the most from these technologies, organisations need to challenge themselves in a number of areas:
• Are they collecting the right data with the right rules and requirements?
• Have they considered the use of machine learning to reduce false positives, or anomaly detection to identify emerging fraud patterns?
• Are they feeding findings from investigations back into their fraud prevention programme to make it more robust?
Supply chain fraud, cyber crime and investment scams are some of the top ways criminals are taking advantage of the current pandemic crisis, according to the technology and information business Refinitiv. It recommends three core due diligence measures to get a better grip on the situation:
- Heightened COVID-19 financial crime risks mean that organisations need to be ‘online smart’ and adopt stringent due diligence measures to safeguard data and resources.
- Supply scams are especially prevalent in the healthcare sector as companies have struggled to identify legitimate suppliers of medicines and equipment.
- The combination of trusted data and a risk-based approach is needed to address the challenges posed by COVID-19 financial crime risks.
