Covid-19 sees businesses increasingly vulnerable to fraud
Covid-19 sees businesses vulnerable to fraud
Three classic fraud factors coincide
More than 80% of senior executives surveyed for a recent KPMG Australia report believe their organisation is vulnerable to fraud taking place right now, mirroring conversations KPMG New Zealand is having with New Zealand executives.
Even before the vulnerabilities presented by COVID-19, fraud has been on the increase. KPMG New Zealand’s Fraud Barometer publication summarises $124m of reported fraud for the 12 month period to July 2019. Net Safe report the amount lost to scams and fraud tripling from 2017 to 2018 and over $6m worth of in online losses alone in the last quarter of 2019.
More recently, we’ve seen Police, the SFO, DIA, FMA and Netsafe all issue warnings to the public around fraudulent activity. There is a renewed focus from Government, with the Serious Fraud Office’s recent budget increased by over 20% to $12.7m to allow them to tackle a greater number of increasingly complex financial crime investigations.
This increase, paired with an additional $10.8m for the Serious Fraud Office’s new policy initiatives to tackle serious financial crime and corruption in New Zealand over the next four years, indicates that Government shares the concerns of New Zealand corporates, and is serious about addressing the problem.
Three classic fraud factors coincide
“Businesses need to be particularly vigilant as we’re currently seeing three classic fraud factors coincide – opportunity, motive and rationalisation,” says KPMG Partner Stephen Bell. “In addition to this, businesses’ responses to the Covid-19 environment, such as an increase in remote working, have opened new avenues for fraudsters to target businesses and employees, taking advantage of weaknesses in new or temporary systems and increased uncertainty amongst staff.”
Further, with businesses focused on limiting the impact of Covid-19, little to no time may be allocated to fraud controls and identifying indicators of fraud, creating additional opportunity for fraud to occur undetected. Financial uncertainty and reduced job-security also create financial pressures which may support the rationalisation of fraudulent behaviours. Unfortunately, our experts have seen scenarios where businesses undergoing change inadvertently create loopholes and access points in their fraud defences which criminals will seek to exploit.
Around a quarter of all businesses surveyed in KPMG Australia’s Covid-19 Fraud Survey say that they have deferred fraud protection and corruption programmes due to the pandemic.
Maintaining a balance between monitoring fraud risk while continuing to adjust business operations in response to Covid-19 will be challenging but is necessary. KPMG recommends that businesses revisit some of their defences now, particularly in areas of recent change, looking for blind or weak spots in business processes, anticipating risks where possible and including ways to eliminate or mitigate these in their response plans.
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