The Covid-19 pandemic has caused a drastic increase in fraud in different organizations. According to the “ACFE Benchmarking Report: Fraud in the wake of Covid-19,” 79 percent of its respondents say they have seen an increase in fraud as of last November, and that this is expected to rise further in 2021.
The pandemic has affected business transactions in unprecedented ways, forcing organizations to change their processes — from interacting with consumers and supply-chain processes to increasing using technology and maintaining the well-being of their people. These rapid changes have shifted the focus to adapting to the new normal and sustaining the business. Many companies are looking for ways to reduce costs and redirect resources to overcome the crisis. The pandemic has also affected the lives of many people, leaving some unemployed or in financial distress. People are anxious about the uncertainty this pandemic caused.
These changes in the working environment could increase the risk of fraud in organizations and to individuals. As organizations scramble to alter processes, controls might be overlooked, which increases the opportunity for employees or outside parties to commit fraud. A chaotic work environment also increases an organization’s vulnerability to fraud.
The remote working setup limits oversight on use of the company’s assets and data that might result in a potential breach. As employees are pressured to achieve their targets or sustain their personal finances, these might drive them to misrepresent their respective organizations’ records to their advantage and override controls or even misappropriate assets. The heightened anxiety among people also makes individuals more vulnerable to fraudsters.
Fraudulent schemes during pandemic
Several schemes were seen to increase during the pandemic. As a result of the extensive use of technology, the frequency of phishing attacks is at an all-time high. These days, most transactions are done online, and these are being used by fraudsters by pretending to be a legitimate sender and inducing victims to provide personal information. Due to the need for financial support and insurance, loans and benefit schemes are also on the rise, through misrepresenting information and claiming benefits they are not entitled to. We have also seen an increase in seller scams, in which the merchant sells counterfeit or substandard items.
How do we respond
With fraud risks increasing, Grant Thornton Ireland listed some ways to minimize them and help organizations detect and prevent them. One is assigning an antifraud champion in your organization to oversee and be accountable for the implementation of antifraud programs during the pandemic. Another is to make sure core systems are updated. As organizations’ processes have changed, current systems might not be suitable to perform their function. Being proactive is also crucial to identifying threats specific to the organization and to new processes introduced or changed. Organizations can also leverage on the use of analytics, especially for big data. This will help organizations identify anomalies immediately, especially in times like this, when manpower is limited. Finally, it is important that these mechanisms are being monitored and iterated as the environment changes.
As we gradually recover from the pandemic, awareness of fraud risks and their impact would help organizations become prepared to handle them. The pandemic might not only increase the level of fraud in several organizations, but also reveal it before it could even begin.
To be prepared, whether there is a pandemic or not, organizations must have a fraud risk management program in place, one that is well-communicated, comprehensive and monitored timely, creating a control environment capable of minimizing risks and detecting threats . During this challenging time, it is important to look ahead on what we can still do. As author Ralph Waldo Emerson said: “What lies behind us and what lies before us are tiny matters compared to what lies within us.”
Gio Belchez is a managing consultant of the Advisory Services Division of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing firms in the Philippines with 24 Partners and more than 900 staff members. We’d like to hear from you! Tweet us: @GrantThorntonPH, “like” us on Facebook: P&A Grant Thornton, and email your comments to firstname.lastname@example.org or email@example.com. For more information, visit www.grantthornton.com.ph.
As published in The Manila Times, dated 13 January 2021