The current economic emergency flowing from the spread of the COVID-19 virus has already resulted in a spike of fraud. The police say that there has been a 400% increase since mid-February.
This is not just the COVID-19 specific fraud attacking healthcare organisations and individuals, but a more 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 15% reduction in GDP is widely predicted for Q2 of 2020).
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 60% 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.
Possible economic pressures may also 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.
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:
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.