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The Human Factor - Sonja Stirnimann 1st June 2021
013 - What changed in the fraud industry since the crisis?
00:00:00 00:23:01

013 - What changed in the fraud industry since the crisis?

I would like to focus on three aspects how the fraud industry was and is affected by the pandemic 

  • Fraud Risks 
  • Anti-Fraud Programs 
  • Investigations 

Fraud Risks 

When it comes to the question how the pandemic affected the different risks of becoming a victim there were different areas to be taken up 

  • How was the risk landscape and risk management setup “before”? 
  • How did the landscape change? 
  • Where do we expect the journey to go? 

If there is no existing risk mapping the change can not be measured. We then only talk about the gut feeling but have no evidence.  

What I have seen at my clients cases is that not only the cases of social engineering in the territory of cyber increases, but also in the non-digital world. On an overall basis the risk of becoming a victim of social engineering increased significantly. 

And compared to the study from the ACFE it is exactly what also my colleagues experienced. The overall fraud level increased and will also increase within the next 12 months, that is what we all expect.  

In addition to that 50% of the participants already see that cyber fraud increased and the expectations go into the same direction.  

Cyber fraud will not remain the only fraud pattern.  

  • Identity theft 
  • Payment fraud 
  • Bankruptcy and Unemployment fraud (and here we talk about the social insurance fraud, credit fraud, etc.)  
  • Fraud by vendors and sellers 

As well as  

  • Health care fraud 
  • Insurance Fraud 
  • Loan and bank fraud 

Plus the evergreen: Bribery and corruption 

will affect our organisations more in the future than ever in the past. 

So, what does that mean to us? I am convinced, if you are listening to this podcast, you have a high maturity level of integrity.  

Important is, that you are not the only lone enthusiast doing so in your organisation.  

You will have much more power if corporate integrity is a strategic priority and not just a “compliance task”.  

Summarizing how Covid-19 has impacted the fraud patterns we in our industry experienced and expect additional increases.  

With that knowledge I would expect from the decision-makers that actions and measurements are set up…. 

 Anti-fraud programs 

The normal process of preventing, detecting and responding to fraud does in real life not start with preventing in a way which could be called “effective prevention”. 

More often it starts with responding as a victim

With the evidence gained in the industry and published we would know that the fraud cases increased and increase. Wouldn’t we expect to have an increase in the anti-fraud program resources too?  

Less than 15% will significantly increase their overall investment into the anti-fraud resources. Less than 30% will slightly increase the spending.  

With these two first areas I would like to give you the food for thought of the take home assignment. The following two questions should challenge either your clients or your companies actual set up 

How does our risk landscape look like since the pandemic started with regard to the above mentioned fraud risks of  

  • Cyber fraud 
  • Identity theft 
  • Payment fraud 
  • Bankruptcy  
  • Unemployment fraud  
  • Fraud by vendors and sellers 
  • Health care fraud 
  • Insurance Fraud 
  • Loan and bank fraud 
  • Bribery and Corruption 

How are the investments in our anti-fraud program reflect the answer of the first question? 

Having an answer on these two questions will give a good understanding of what you can expect from the near future related to your fraud risk… 

Last but not least I would like to share with you the  

Challenges as an investigator  

It is not a secret that the work – not only in the fraud industry – changed.  Also for the one which have to conduct investigations.  

During an investigation we have several different phases but there a quite a few where – in the past – physical meetings were required. Especially when we think about our global cases which also needed a certain amount of traveling.  

Our involved parties are often not at the same locations. Not the ones we have internally nor the external ones.  

The coordination of the teams as well as the other involved parties changed and requires additional technique involved.  

In our cases, the data storage as such to conduct the investigations was not an issue as we have centralized servers.  

But one of the key challenges was that the direct exchange within the team was not possible as we were used to it. Normally we have different teams working together in their own room to ensure that the knowledge can be shared.  Now we had to set it up virtually.  

The same for our interview process. Interviews are one of the key elements we conduct for our clients. With the new virtual set up it was necessary to train all our team members as it needs additional skill sets to perform virtual interviews.  

More than 75% of the global peer group also replied that the work as such became more difficult.  

I think it is not difficult as such but requires adapted process and new training of all involved parties in the team.  

KEY MESSAGES

The more adaptive we are the more exciting and successful it can be – and vice versa.  

What I asked in our team – and maybe this is also a question which could be brought up in your environment: 

“What is your adaption maturity level?” 

I used a scale from 1 to 10. 10 means “I am very adaptive” 

And with mentioning a number also the example – not older than 2 years – was mentioned.  

You can imagine that already the question itself made it possible to shift the perspective….

My personal conclusion of what changed in our industry is quite simple:  Everything and nothing! 

Our clients and also our team went through a valuable journey and I am convinced, your team, your clients and yourself too. 

EPISODES' REFLECTION

How does our risk landscape look like since the pandemic started with regard to the above mentioned fraud risks of  

  • Cyber fraud 
  • Identity theft 
  • Payment fraud 
  • Bankruptcy  
  • Unemployment fraud  
  • Fraud by vendors and sellers 
  • Health care fraud 
  • Insurance Fraud 
  • Loan and bank fraud 
  • Bribery and Corruption 

How are the investments in our anti-fraud program reflect the answer of the first question?

IMPORTANT LINKS AND MENTIONS

https://www.acfe.com/covidreport.aspx

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