Moore Stephens
COVID-19

Fraud in the age of COVID-19

Whether through employee layoffs, complete shutdowns or the loss of many key customers and suppliers, the pandemic has left many organizations reeling. A number of challenges have arisen in recent months, including remote working, the increased use of technology and the reduction in the number of employees. These changes will inevitably have undermined pre-pandemic operations monitoring activities, in particular, as well as employee confidence in their organization.

It is in the context of these changes that theAssociation of Certified Fraud Examiners (hereafter “ACFE”), an organization dedicated to the study of fraud, released a report in June 2020 concerning the impact of the pandemic on fraud. We present recent statistics based on the observations and experience of 1,851 respondents.

All survey respondents are ACFE members, over half of them in North America (54%). The majority of respondents work in the public sector (24%), banking (21%) and professional services (16%). Most of them work as fraud specialists for companies (58%), professional services firms (21%) and law enforcement agencies (15%).


OVERALL PICTURE OF FRAUD
Some 68% of respondents have already experienced or observed an increase in fraud during the pandemic period:
  • Cyber fraud: 81% of respondents noted an increase, as organizations have had to rely more heavily on the use of technology to continue their operations. Cyber fraud includes phishing emails, ransomware, president fraud and malware attacks.
  • Fraud perpetrated by suppliers: an increase in cases was observed by 68% of respondents. This fraud includes over-invoicing, product misrepresentation and fraudulent pricing.
  • Payment fraud : an increase in these cases is noted by 60% of members of this group. Payment fraud includes credit card fraud.
  • Corruption: 43% of respondents noted an increase. Corruption includes bribes, illicit gifts and extortion.
  • Embezzlement: This scheme is on the increase, according to 33% of respondents. This fraud includes money theft, payroll, billing and cheque schemes.
  • Financial statement fraud: also on the rise, according to 30% of respondents. This type of fraud includes, among others, fictitious income, deferral of expenses and overvaluation of assets.

And there’s more to come, as 93% of respondents believe that fraud cases will increase over the next year (between May 2020 and May 2021).

IMPACT ON PREVENTION, DETECTION AND INVESTIGATION

Some 74% of respondents believe that professionals will face greater difficulties in preventing and investigating fraud, while 68% of professionals believe that detecting fraud has become more difficult during the pandemic.

Despite the growing challenges, 62% of respondents do not believe that their organization will hire more staff to fight fraud. However, half of respondents are optimistic about increasing the budget allocated to anti-fraud programs.


WHAT WE NEED TO REMEMBER

Financial difficulties, lack of oversight of operations and the frustrations experienced by employees and organizations will inevitably lead to an increase in fraud. This study has shown that organizations need to be more alert to fraud signals if they are not to fall victim.

 

We can assist you in proactively detecting fraud signals by reviewing past transactions. We can also help you design and implement an anti-fraud program.

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