Stemming social inclination to fraud to emerge stronger in the new World

The blinded side of the new realm

Needless to reiterate, that the pandemic challenges encountered by businesses and governments in Ukraine and far beyond across the Globe have shaken up and influenced the way many of them operate and deliver their missions nowadays. In quite a short timeframe (less than 6 months), the encountered changes have morphed the reality that we used to more or less confidently navigate through into the new paradigm of numerous uncertainties where the legacy approaches, actions, procedures and rules put on scales no longer balance risk and value and nor enable or provide that much guarantee or comfort for success, sustainability and growth as one would expect.

That may certainly sound a sort of frightening on embarrassing a bit, however not dooming at all, at least from my standpoint. And as the adage goes: "Challenges temper and create opportunities". The question is – which ones and for whom?

For me, as a forensic expert, the ever changing status quo in the last 6 months across industries, sectors and organizations of various type, size and geographic span, vividly highlighted the rise of institutional transformation initiatives and struggles for sustaining and securing the future – ranging from blindly ad-hoc to well thought out and pragmatic.

But even more remarkably, it outlined how genuinely adaptive and bending the nature of fraud turned out regardless of the unclarity and turmoil of change pervading around.

It came to me through a mix of serendipity and observations that I started to feel and capture to some extent inadvertently and unconsciously back in mid-March 2020 when the lock-down made most of the occupied people in Ukraine stay and work from home. I was also in the same shoes at that time. And yes, we were locked but not fully deprived of the face to face social connections or interactions. And that was probably one of the key things that remained stable until now.

Mostly tethered at home, I chased and valued every single need for stepping outside (certainly law-obediently, safely and for only vital stuff to do) and treated it also as both a soft of a remedy from the quasi-incarceration as well as an opportunity to keep social. Along my scarce journeys through the half-empty and not that noisy city I still happened to meet with a number of individuals from different institutions as well as chanced to innocently observe unknown to me people chatting in supermarkets, streets and gas stations on how they strive to accept and adapt to the new realm.

These were subtly embedded between the lines of small talks or hear-says on neutral topics with no that much deep sense but rather as though aimed to allay the thirst for social interaction, longing to keeping the work-life balance parity, and fend off the background feeling of isolation. By and large, nothing special or out of a kind.

But, after a fortnight or so, forensic mindset was saturated with all those as much that it blew-out with enlightenment on the other shadowed side of the status quo:

“…on how the remote way of doing job and lack of sufficient controls and oversight put in place created lucrative opportunities for committing both internal and external fraud”.

And it was fascinating, just as an "eureka" for sir Newton ages ago. Though quite obvious and at the same time ulterior, I felt astonished on how the lack of operational effectiveness of existing policies and standards in anti-fraud area for the full-fledged remote mode, use of home / public and other potentially not sufficiently secured networks, storing sensitive information outside employers’ premises and many other vulnerabilities instantly made institutions' doors that wide ajar to enormous hidden menace of inbound and outbound threats of fraud. And the gamut for it was enormous: from petty misbehaviors with charging personal expenses as work related ones and up to much more severe irregularities like financial statements manipulations and corporate espionage.

This hypothesis to me was definitely the one that had to be checked and clarified from the standpoint of its validity, magnitude and trend. So, I focused on more vigilant observations of acts and talks happening around as well as relentlessly sought for relevant surveys / researches and delved into the psychological side of the matter. I deliberately did not take any side - either aiming to prove or dispel - but rather cool-headed forensically focused on capturing and collating facts. And my findings and observations made me feel really worried...

From the standpoint of the so-called “fraud triangle” (see Picture 1) my observations quite smoothly fall into the Opportunity domain, but these constitute just a piece of the tempting "pie" that a more focused forensic look and vary eye would probably notice. Nevertheless, having the Opportunity on the table would usually not suffice to feed one up – to make the fraud happen.

The Incentive / Pressure and the Rationale should be there as well. And the way how they did it and keep doing is a truly cool art enabled in the blind noble pursuit for sustainability in operations and something that is much more worrying for me than probably anything else ever before in my forensic career.

When it comes to the Incentive / Pressure side - my observations, research and recalls from forensic investigation experience in occupational fraud, made me come to the conclusion that shifting the tumbler of operating mode to remote state not only in no way assumed putting off almost any already existing operational burden from the locked-down employees, but also quite often voluntary and compulsory created the duress of doing same or more will less (in terms of market capacities, tools, salaries, etc.).

Consequently, in addition to the initial stress of remote work it saturated the overall ambiance with a growing concern of losing job and means for living, paying the bills and family care. And right here, along with the need to outperform at its best, the ways of demonstrating it and endeavors to safeguard oneself and those of care have come to fore and started to clash. 

All this may seems quite obvious and straightforward, but if one looks through the average prims of employees' inclination to fraud (see Picture 2), up to 80% of the affected staff, either consciously or subconsciously, but still faced a dilemma as to the extent of integrity, loyalty and care they would take and tolerate in the impending uncertainties regarding the future of their well-being.

And this is, I believe, the right point where the corporate culture – conveyed through tone from the top, management's care, support and guidance - comes to help being timely and carefully applied to help those in doubt and anxiety to make the right choice. Although it could seem naive to state that whatever actions or behaviors committed and demonstrated top-down will positively affect all the population in question, but I believe that giving it a try is never too late and would definitely help to contribute to better sustainability and resilience to related fraud risks - both in terms of probability, scale and impact of those.

At this point one may also note, that the above is less effective than promptly adapting any tailored academic-flavored approaches to managing fraud related risks covering i.e.: focused fraud risk analysis and response; installing proper security tools; deploying and monitoring, control and oversight procedures; having a whistleblowing hotline running 24/7 or raising awareness of staff on the fraud trends.

I agree that in the mid or long run these measures could certainly prove their usefulness and bring the envisaged value. But unfortunately, it will be presumably far after the decision at the intersection is made and the gear on the chosen path in further tenure within the employer's organization relentlessly ascending.

For me, the core essence and main focal point here is much more about addressing the social / human side as the one of the outmost valuable assets of any organization and at the same time one of the most prone to fraud perils that could lead to detrimental repercussions if treated lackadaisically or left negligently unattended. And it's not a rocket science by substance, it's merely about dealing with people, being in touch with them as though still standing back to back in the office - listening to them, hearing and reacting, instilling comfort, demonstrating and cultivating right behaviors, conduct and attitudes, taking leadership and providing necessary coaching and guidance.

At the end of the day, I believe such apparent but still underattended focus on the social side of the issue will help organizations not only to stop this time-bomb ticking or overcome the downturn much easily, but also to emerge even stronger and create enormous opportunities for real differentiation and truly breaking-through steps in terms of performance enhancement, beating out the competition and streamlining growth.

From the optimistic angle even in this case one could also say that it's almost never late for taking the right actions and decisions, whatever tough, hard or unobvious their prospective is or may seem. Hope in the turbulent cultivated World of constant changes and even more looming and obstinate fraud threats that we live in now it's also not...