In KPMG’s recent 2021 Fraud Survey, 72% of respondents indicated that the risk of fraud and corruption has increased over the past year.
Moreover, scammers are becoming increasingly creative in their attempts to swindle money. For instance, one new scam involves criminals requesting payment for early access to a COVID vaccine, while another offers non-existent investment opportunities in vaccine manufacturers.
It goes without saying that fraud is big business. Recent research published by PwC revealed the following:
- Globally, fraud has cost firms $60 billion over the past two years.
- Of the 5000 businesses PwC surveyed, more than one in five lost more than $7 million to crimes involving fraud.
- About three per cent lost more than $140 million to scams, even before brand and reputation damage is taken into account.
Common types of financial fraud
- Cybercrime continues to skyrocket
According to the Australian Federal Police (AFP), cybercrimes include “crimes directed at computers or other information communications technologies.” Examples include hacking, denial of service attacks and ransomware attacks.
“Large-scale ransomware attacks such as the recent one on a US fuel pipeline and locally on Nine will continue to pose a threat to large and small corporations,” says Ajay Unni, founder of Stickman Cyber.
Businesses must ensure they have up-to-date cyber security software to reduce the risk of cyberattacks. It’s also important to formally delegate responsibility for cyber security in the business, train staff to identify scam emails and consider buying cyber insurance.
- Identity fraud on the rise
The Office of the Australian Information Commissioner (OAIC) says identify fraud involves, “someone using another individual’s personal information without consent, often to obtain a benefit.”
In 2021 alone, Australians have so far lost more than $2.5 million to identity theft scams, according to the Australian Competition and Consumer Commission’s Scamwatch data.
Identity fraud has become increasingly common as criminals access swathes of personal information available on the dark web. Fraudsters use this information to create false personas to access bank details or even pose as someone else when applying for a job. As a result, it’s essential to verify the personal information of all new hires and customers.
- Email scams are hitting companies hard
Invoicing fraud has become one of the most common cyber threats during COVID. “Successful frauds perpetrated this way have risen dramatically over the past year,” says Susie Jones, CEO and co-founder of cyber security firm Cynch.
These attacks involve a staff member clicking on a phishing email and providing security information such as a username and password to a fraudster. The criminal then uses this information to log into the system and send fraudulent invoices to internal and external accounts teams.
Jones says enabling two-factor authentication on emails and introducing programs to help staff distinguish real and fake emails are two important measures when it comes to combatting invoice fraud.
“Also put verification processes in place to check bank details for high-risk transactions,” she recommends.
Stopping fraudsters in their tracks
While fraud may be on the rise, there are plenty of actions businesses can take to reduce the risk to their operations.
- Budget for fraud prevention
It’s critical that companies provide space for combatting fraud in the budget. This is important, given PwC’s research indicates only 34% of survey respondents have formal risk assessment processes.
- Have fraud prevention policies in place
Organisations must develop an overarching governance framework to guide executives’ approach to combating fraud. This includes setting out guidelines and policies for conducting investigations into fraud, and clearly articulating disciplinary measures.
- Conduct thorough background screening
Finally, it’s important you know your company – around 24% of financial fraud is committed by internal contacts. Thorough background screening of all new and existing employees will ensure your people are fit to work in their roles. Establishing a clear yet robust background screening policy will govern this process, and establish a more trusting and open relationship with your team.
Likewise, it’s also crucial you know who you’re going into business with. More than half of all financial fraud is committed by business ‘outsiders’. Ensure your customers are who they say they are, and are fit to do business with, by running KYC (Know Your Customer) checks.
As for the future, expect new technologies to keep driving frauds and scams.
It is essential that businesses take a holistic approach to tackling fraud. Fraud prevention must be a priority for management and the board, who are charged with overseeing formal governance processes that determine how to combat fraud from the top down.
This is the best way to enmesh a culture of fraud prevention right across the business, and stop fraudsters in their tracks.