Beware of Increased Fraud as a Result of COVID-19
The Association of Certified Fraud Examiners (ACFE) recently published the results of its second benchmarking report, “Fraud in the Wake of COVID-19,” based on survey results from more than 2,000 Certified Fraud Examiners across various industries. This report, published in September 2020, indicates that cases of fraud have increased during the pandemic and that the trend is expected to continue.
In “Fraud in the Wake of COVID-19,” the ACFE reports that 77% of respondents had observed an increase in the overall level of fraud they experienced, with 34% reporting a significant increase. Moreover, 92% of respondents expect to see a further increase in fraud over the next year.
Not only is fraud rising as a result of the pandemic, but respondents also reported that preventing, detecting and investigating fraud have become more difficult as a result of COVID-19. Challenges noted include conducting remote interviews, lack of access to evidence, physical limitations on travel, changes in controls and a lack of oversight due to the remote working environment, reduced staffing and decreased budgets for anti-fraud programs and initiatives.
COVID-19 has presented significant challenges to every organization. With many businesses fighting to survive and changing their business models to align with pandemic realities, fraud prevention has likely been moved to the proverbial back burner for the moment. However, there are some simple things that organizations can do to manage their fraud risk in this challenging environment.
In the ACFE’s report, 83% of respondents reported an increase in cyberfraud, making it the biggest fraud risk reported. With most office employees still working remotely, cyberfraud is an even more potent risk due to increased distractions in the home.
One way to simply and cost effectively reduce cyberfraud risk is through increased training and awareness regarding cyberfraud schemes and how to spot them. Far too often, employees from entry level to C-suite are the gate through which cyber criminals enter a business. Consistent cybersecurity training reminds employees to think before responding to an email or text message.
Business owners should brainstorm and identify the fraud risks that exist in their current working environment, especially considering that in-person oversight of employee activities has decreased significantly. Controls established for a largely in-person working environment might not be feasible in a remote working environment. In particular, consideration should be given to whether the current remote working environment and reduced staffing allows for adequate segregation of duties and review of processes. If too much control rests with one key employee, business owners need to provide additional oversight to activities such as vendor payments and payroll to ensure their validity.
COVID-19 has presented numerous challenges for every business. Business owners should be aware that fraud continues to present itself as a significant challenge in the current environment, and for the foreseeable future and should take steps to consider the specific fraud risks inherent in their business and how to address them in the current environment.
For more information on how you can protect your business in the current working environment, please contact Margaret Kolb, Director in the Litigation, Forensic & Valuation Services Group (LFVS), or Anthony Bracco, Partner and Leader of LFVS, or your Anchin Relationship Partner.
Margaret Kolb and Anthony Bracco
See here more content by Anchin