Prepare for the forthcoming surge in fraud

Prepare for the forthcoming surge in fraud

Jim Gee, Partner, National Head of Forensic Services
26/06/2020
Prepare for the forthcoming surge in fraud

The best approach to take now

The current economic emergency flowing from the spread of the COVID-19 virus has already resulted in a spike in the levels of fraud. The police issued statistics evidencing a 400% increase since mid-February.

This is not just the COVID-19 specific fraud attacking healthcare organisations and individuals. There has been a more general increase in the extent of fraud against all organisations as people come under greater financial pressure or seek to benefit from the uncertainty. Fraud always increases faster in recessions and we now have an economic decline under way that is deeper than any experienced since World War 2. GDP is widely predicted to drop by 25% in Q2 of 2020.

Research shows a likely increase of fraud 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, as they become active rather than passive.

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. It is unlikely that any organisation will be immune to these changes.

The best approach

All round protection is needed to minimise the impact of this fraud spike on your organisation. This is comprised of the following six steps.

1. Existing ‘controls’ – not very effective against such a rapidly evolving threat as fraud, even at the best of times –
    need to be reviewed and strengthened.

2.  Messages need to be communicated to strengthen a culture of integrity and to deter the dishonest minority.

3.  High risk areas both internally and externally need to be profiled (people, suppliers, etc.).

4.  Advanced data science techniques need to be deployed to detect anomalous behaviour and payments.

5.  Organisations need to make sure that they have access to a capacity to undertake lawfully proper remote investigations in 
      the context of current social distancing rules.

6.  Organisations also need information and intelligence as the threat of fraud develops and evolves across the economy.

Ten questions that every organisation should ask

1.   Do you have staff or managers who are likely to be under financial pressure in the current circumstances?

2.   Do you have suppliers who are likely to be under financial pressure in the current circumstances?

3.   If the answer to either of the first two questions is yes, then have you put in place special measures to monitor these areas
      of higher risk?

4.   Have you communicated to staff the need for extra vigilance against fraud?

5.   Have you communicated to suppliers that the organisation will be extra vigilant concerning fraud?

6.   Are you using data analytics and data science techniques to analyse financial and other data and identify anomalies?

7.   Do you have the capacity to undertake remote investigations in the current situation (including remotely taking forensic images
      of computers and remotely interviewing witnesses and suspects)?

8.   Do you have access to the right advice about employment, regulatory and legal sanctions if fraud is found to have taken place?

9.   Do you have access to intelligence about the threat of fraud as it develops and evolves across the UK?

10. Do you have the right skills in house to meet the heightened threat or do you need to access these externally?

Crowe can support your organisation to increase its level of protection. The heightened level of threat demands action now. Don’t let our crisis become the fraudsters’ opportunity. Please contact Jim Gee to discuss this further.

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