Through a series of surveys, the ACFE has compiled a report that reflects on the effects of Covid-19 on the business world. Using data gathered from April-May of 2020, there are some interesting predictions made regarding the evolution of fraud risk in an also evolving landscape of day-to-day business practices.
This report, being among the first assessments of our Covid-19 environment, gives interesting hypotheses about the future of fraud risks as well as how we predict businesses will respond with fraud preparedness (or lack thereof). Be looking for further issues of this report, as the ACFE is continuing to evaluate the changing landscape of businesses.
I hope this helps you to assess your organization’s current fraud risks and encourages you to stay vigilant in potential fraud risks as we prepare to move into the final quarter of the year.
Below, I’ve highlighted a few points I found most relevant as we decide what to prioritize in our anti-fraud environment.
· COVID-19 has affected—and will continue to affect—the business environment in countless ways. Travel bans, employees working remotely, an increased reliance on technology, and economic uncertainty have become the reality for many organizations around the world. And while these and other hurdles present numerous logistical and operational challenges, they also open the door to the increased pressure, opportunity, and rationalization that can lead to fraud. (Introduction, Pg. 3)
Simple, tough truth. Increased struggle for everyone and ever-changing locations and regulations increase each leg of the fraud triangle. People experience pressure, people see new opportunities for fraud, and people can more easily justify actions in these “unprecedented times”.
· As of May 2020, we are seeing a 33% increase in employee embezzlement. Overall, 71% increase in employee embezzlement is predicted over the next 12 months.
As of May 2020, we are seeing a 23% increase in instances of financial statement fraud. Overall, a 71% increase is predicted over the next 12 months.
It is important to be vigilant in these areas of fraud potential because they are among the easiest to perpetrate when proper internal controls are not in place. And with employees working from different locations, loss of staff, changes in communication protocol., our Pre-Covid internal controls may be obsolete in their effectiveness.
(See Pg. 7 of the report for more predictions on the increase of different types of fraud)
· Expected Change in Investment in Anti-Fraud Programs Over the Next 12 Months (Pg. 9)
I was pleased to see low predictions in DECREASE of investment into anti-fraud. With the myriad of changes we are all experiencing, it could be easy to de-prioritize fraud protection. Please do not lessen your fraud awareness and preparedness during this time. Vulnerabilities only grow larger during times like this.
· Prominent Challenges in Combating Fraud in the Wake of Covid-19 (Pg. 13) This chart highlights issues like lack of oversight due to remote workforce, technology challenges, maintaining data privacy/security, and the problems created by communication challenges and delays.
While this graph stands to highlight why fighting fraud is getting more difficult, each of these items could also stand as warning signs for reasons fraud itself might increase. Consider how each of these issues affects your organization daily.
Although business and daily life looks very different from the beginning of March 2020, the simple message about internal fraud has not changed: be aware, educate your organization, and take steps to protect the future of your organization.
Empowering small businesses to develop strong Anti-Fraud Programs is our mission. We provide consultations to design, evaluate, and improve your anti-fraud program. You can also get a step-by-step guide to design a program that can be tailored for your specific needs by purchasing Steve Dawson’s book, Internal Control/Anti-Fraud Program Design for the Small Business.
If you think there may already be fraudulent activity in your company, contact us today through our website.