- September 11, 2020
- Posted by: Jamie Nardello
- Category: Blog
Fraud can happen even during times of economic growth. Why? When companies’ revenues and profits are on the rise, there’s often not much motivation to put resources into detecting and preventing fraud. Moreover, the increased volume of legitimate financial transactions means it’s harder to pinpoint fraudulent ones. That means that fraud can go undetected for a long time – months, even years.
The flipside of this is that economic slowdowns can result in a higher rate of fraud detection. However, like much of 2020, typical patterns of behavior aren’t playing out as expected. This means that companies are needing to detect fraud in new ways.
Fraud is growing
Right now there are millions of workers doing their jobs from home. Offices are emptier than usual. That alone makes it harder to report irregularities. And as managers struggle to facilitate the new workplace norms, they’re less available to engage in the regular oversight that helps prevent and detect fraud.
The result? Although the current recession would normally encourage companies to hone in on financial irregularities, the high level of distraction makes it easier for fraud to flourish.
Moreover, fraud is increasingly digital. The COVID-motivated work-from-home arrangements have allowed new points of access for cybercriminals. Fraudsters are taking advantage of insecure home networks, going after unemployment benefits, and targeting anxious consumers with fake COVID-19 treatments and bogus protective gear.
It’s not just hackers that are participating in fraud. Insider fraud is a major risk during this time due to massive business losses. Executives that expected performance bonuses could potentially meddle with metrics in their financial statements. Financial statement manipulation doesn’t have to meet the definition of fraud to be problematic; failing to meet the Generally Accepting Accounting Principles to create a more optimistic image of financial situations can still create issues for businesses.
Reacting to the crisis
Almost every business is dealing with challenges related to COVID-19 on some level. But even with the pandemic continuing to roar throughout the country, fraud detection needs to be a priority. Businesses must continue to invest in the people, processes, and technology that protect their assets from financial crimes. Yes, on paper it may seem like a good idea to put off your annual fraud risk assessment, but now is not the time to cut corners.
Even if it uncovers nothing worrying, it will still communicate to your staff and shareholders that you take fraud seriously.
Given the damage that fraud can wreak on your business, consider taking further steps, too. Internal fraud happens more readily when employees think no one is looking, so make sure your team is aware of controls like your confidential fraud hotline or anti-fraud processes like digital signature approvals for remote teams.
2020 has brought a lot of new worries for business owners and managers. But while you have a lot on your plate, don’t put fraud prevention to the side. Contact our team at Smolin Lupin. We can work with you to help you prioritize your risks and determine the effective responses needed to keep your business and assets safe.