By Kerry Sapet, SDC CPAs, LLC
Fraud is an ever-evolving crime with fraudsters continually adopting new methods and concocting schemes to suit the conditions of the times. Currently, during the COVID-19 pandemic, fraudsters are creating new ruses by manipulating society’s changing needs and priorities. Fraudsters were particularly adept at playing on human emotions, concerns, and fears. As companies and individuals navigate these unusual times, the atmosphere is ripe with opportunities for schemes.
In September 2020, the Association of Certified Fraud Examiners (ACFE) released their comprehensive Fraud in the Wake of COVID-19: Benchmarking Report. This report demonstrates significant increases in several major areas of fraud. Many of these increases can be tied to the current global pandemic.
Cyber Fraud
The ACFE report shows an 83% overall increase in instances of cyber fraud. As business moves online, so does fraud; with organizations moving to digital platforms and remote work models, many workplaces’ fraud prevention measures do not hold up to the different demands of a remote workforce. The greater use of digital work solutions and still-developing security measures, in turn, leads to increased cyber fraud.
Companies should assess their remote work options to balance effectiveness and security. Cyber fraud prevention training and reporting channels for employees are more important than ever, as periods of transition and uncertainty make organizations especially vulnerable to cyber fraud.
Fraud by Vendors and Sellers
As organizations turn to new digital vendors to adapt to current conditions, fraud by vendors and sellers has increased by 69%. These fraudulent vendors understand and exploit the needs and vulnerabilities of companies trying to adjust their workflow to protect employees and clients from the virus. Notably, the many scams involving fraudulent PPE may be a significant contributor to this increase.
Companies can protect themselves from fraudulent vendors by relying on trusted referrals, practicing skepticism about “too good to be true” offers, and carefully overseeing purchasing from new vendors. Equally important is examining and strengthening company policies and procedures regarding new and existing vendors. Companies also should ensure employees are following strong, established internal controls.
Identity Theft
Economic difficulties caused by the pandemic have motivated a 67% total increase in cases of identity fraud. With financial motivation, fraudsters have been able to exploit the transition to digital channels and use targeted scams to commit identity fraud. The virus has given thieves opportunities to create traps such as phony communications from the IRS regarding stimulus payments and phishing emails posing as banks’ digital channels.
These attempts can be foiled by not following links in emails, using official channels to access accounts, and calling the organization’s main telephone number to ask about the validity of an email. Training employees to be the first defense in recognizing unusual emails can help to shore up a company’s defenses against cyber fraud.
COVID-19 has dramatically changed the status quo and created motivation and opportunity for fraud. Understanding your organization’s vulnerabilities and fraudsters’ methods is critical for protecting against the many forms of fraud.
This article should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only. If you would like more information regarding this subject, please contact the author at 630-820-5770 or ksapet@sdccpa.com.
This is a publication of Southern Loss Association, Inc., P.O. Box 421564, Atlanta, GA 30342. The articles published on this website are in a general format and are not intended to be legal advice applicable to any specific circumstances. Legal opinions may vary when based on subtle factual differences. All rights reserved.