Think Pandemic-Related Fraud Is Going Away? Think Again

The COVID-19 pandemic has ushered in big changes to how business is conducted. Some of these changes are not temporary — and they will have a big impact on organisations’ fraud risk, writes Bruce Dorris, President and CEO, ACFE.

In a new report from the Association of Certified Fraud Examiners (ACFE) and Grant Thornton, 51 percent of antifraud professionals surveyed said that they have uncovered higher levels of fraud since the pandemic began, with 20 percent saying the increase was significant.

While it would be optimistic to believe fraud levels will decrease to pre-pandemic levels as businesses and offices reopen, 71 percent expect the level of fraud affecting their employers to continue to increase over the next year. One reason we can likely expect more fraud to proliferate is the massive changes in underlying fraud risk factors that have arisen since the onset of the pandemic.

The two factors that ACFE members said had the most significant impact on fraud risk are shifts in business operations and changes in consumer behaviour. While some operations and behaviours may revert to prepandemic norms, things like inoffice workforces, brick-and-mortar banking and business travel may not ever return to previous levels.

With 27 percent of anti-fraud professionals predicting that pandemic-created changes to business operations and consumer behaviour will continue to have a significant impact on fraud risk in the coming year, business leaders need to treat these changes as more than temporary and incorporate them into their risk assessments and anti-fraud plans. A failure to do so could cost your organization significantly.

While the changed business landscape has increased fraud risk for organisations, detecting and investigating fraud have also become more difficult. Common red flags, like someone living beyond their means, are harder to spot when you can only see one part of a room in their house on a video call.

Many organisations have reported receiving fewer tip-offs from employees, which may seem like good news on the surface, but when employees are working remotely, they’re less likely to spot red flags of fraud and report them. Receiving fewer tip-offs does not mean less fraud is occurring. It is far more likely that significant levels of occupational fraud are simply going undetected or unreported. As we return to a normalised control environment, expect to see these frauds begin bubbling to the surface.

Looking toward the future, organisations need to plan on bolstering their anti-fraud resources in response to the likely increase in fraud. Many organisations have cut travel budgets due to restrictions and safety guidelines during the pandemic — with 39 percent of antifraud professionals saying their travel budgets had decreased in 2021 and 21 percent expecting a decrease for 2022 as well.

While it was prudent to limit travel during the pandemic, continuing to reduce travel for audits and investigations will undoubtedly impact your organisation’s ability to prevent and detect fraud. Potentially even more short-sighted is the fact that 22 percent of organisations cut budgets for anti-fraud training for 2021, and 13 percent plan on decreasing those budgets in 2022.

Certified Fraud Examiners estimate that organisations lose five percent of their revenue each year to fraud, and after the massive hits that so many industries took in the past year-and-a-half due to the pandemic, business leaders can’t afford to ignore the risks. Now is the time to reexamine your risks and invest in your anti-fraud resources. We’re not out of the woods yet, and won’t be for some time.