The uncertainty and disruption caused by COVID-19 also creates opportunity for crime and fraud. Our latest Global Economic Crime and Fraud Survey published in early March 2020 found that economic crime and fraud incidents suffered by Singapore based companies were at the highest level ever. The current crisis has the potential to further exacerbate fraud incidents as businesses try their best to manage the disruption and stay afloat.
There are various reasons for it.
Priority focus is not on controls
Unavoidable adjustments to existing controls reduce their effectiveness
Automatic surveillance systems are “drowned” by a tsunami of false positives
Fraudsters know well that COVID-19 related disruption brings new opportunities and new targets: business processes are more exposed and people are more vulnerable.
As employees connect remotely, new infiltration opportunities arise. Sophisticated social engineering techniques leverage on increased stress levels. IT teams and IT infrastructure systems come under pressure.
Use of unsecure
Business impersonation techniques
While fraudsters uncover and take advantages of loopholes in government relief packages, criminals alter their modus operandi in light of the Covid-19 outbreak to increase their illicit gains.
Abuse of government relief programs
Fraudulent investment opportunities
Organisations face unprecedented supply chain disruptions, i.e. transportation restrictions, manufacturing interruptions and defaults on contracts. Companies are compelled to find alternatives and perform fewer controls due to the urgency.
Misappropriation of goods/ supplies/ payments
Inadequate due diligence on new vendors
Deceitful unfulfillment of contractual obligations
Standard processes and controls in sensitive areas such as approvals, pre-transactional reviews and processing and release of payments are relaxed, with post-transactional reviews being less effective.
In such environment, organisations need to have a clear understanding of:
Practical actions that can be embedded in day-to-day control framework:
Raise the awareness on new risks (with prompt and focused communications and trainings) across employees, clients and suppliers.
Adapt your due diligence to the heightening third party risks (screening and monitoring).
Remind your incident reporting protocols to all relevant stakeholders (employees, clients and suppliers).
Keep as many audit trails as possible and plan for post-transactional reviews, focused on risk of fraud.
Formulate a structured approach to identify, reduce, and remediate fraud risks as part of your COVID-19 response so you can protect your business, people, customers and other stakeholders.