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Protecting your Pension Scheme against Fraud

Jim Gee, Partner, National Head of Forensic Services 
29/06/2020
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The current economic crisis has already resulted in a spike of fraud.

This is a general increase in the extent of fraud against all organisations as people come under greater financial pressure. Fraud always increases faster in recessions and we now have an economic decline now under way that is deeper than any experienced since World War 2 (an estimated 25% reduction in GDP is expected for Q2 of 2020).

Research indicates fraud attempts will increase by 60%

The latest research from Crowe and Europe’s premier research institute in this area, the Centre for Counter Fraud Studies from University of Portsmouth, shows a likely increase of over 100% in the extent of fraud. This is based on analysing the rate of growth of fraud against GDP shrinkage in the last three major recessions going back to 1980.

Related problems are also likely to be growing as the dishonest minority (which is present at any time) become active rather than passive (there is, of course, also a vast honest majority which is present at any time).

All organisations are susceptible to these threats but, given their role in society, it is crucially important that pension schemes and those who supply them, are properly protected.

Economic pressures are also likely to lead people to radically re-evaluate loyalties and to rationalise behaviour which, in normal times, they would not consider appropriate. Pension schemes and their third-party suppliers will not be immune to these changes.

The best approach for Pension Schemes

A pension scheme’s third party suppliers include those who undertake member administration, pensions payroll, banking and asset management, payment processing, insurance including buy-ins, accounting, actuarial, legal and other support services. Many will hold or have access to sensitive personal data, commercial data and have payment/asset transfer capabilities.

Pension schemes need to be asking questions covering a number of areas:

  • Are existing ‘controls’ – not very effective against such a rapidly evolving threat as fraud, even at the best of times – being reviewed and strengthened?
  • Are messages being communicated to strengthen a culture of integrity and to deter the dishonest minority?
  • Are high risk areas (both internally and externally - people, suppliers, etc.) being profiled?
  • Are advanced data science techniques being deployed to detect anomalous behaviour and payments?
  • Do third party suppliers have access to a capacity to undertake lawfully proper remote investigations in the context of current social distancing rules?
  • Do they need information and intelligence as the threat of fraud develops and evolves across the economy?

How Crowe can help

Crowe can help clients to put in place this increased level of protection. The heightened level of threat demands action now. Don’t let our crisis become the fraudsters’ opportunity.

Contact us

Jim Gee
Jim Gee
Partner, National Head of Forensic Services
London