April 14, 2024

Fraud risk spike post COVID-19?

The COVID-19 outbreak is still wreaking havoc on people all over the world. The number of infected persons grows by the hour, and in many nations, mobility restrictions are tightening, health-care systems are failing, and stock markets have had their worst weeks since the 2008 financial crisis.

It is easy to understand how the crisis could create ideal ground for UPI Frauds. People are more vulnerable as a result of the mix of financial and health problems, which opens up opportunities for fraudsters. It has already been reported in several nations that criminal gangs have begun to target empty commercial properties in order to steal goods and supplies. How long will it be until certain staff are found to be incompetent?

Companies must consider how their staff will react to the severe commercial pressure brought on by this one-of-a-kind economic environment. We have identified several pressure points in the new environment that enhance the danger of fraud.

Tracking new suppliers and other business partners as quickly as possible

  1. The risk of working with questionable or even restricted third parties if third parties are not adequately verified and screened;
  2. Working with new agents/intermediaries due to the closure of existing agents or the inability of present agents to produce the volume required;
  3. The push to get things to market as soon as possible.

Dealings with government officials have increased

  1. Regulatory approvals, crucial intellectual property issues, supply chain, and financial aid are all increasing the number of interactions employees have with government officials in higher-risk nations, many of whom may not be trained for such interactions.

Resource redistribution

  1. Business models are being challenged, and executives are focusing on operational measures rather than compliance and fraud prevention.
  2. The temporary transfer of personnel to operations may result in understaffing of prevention duties.
  3. Illness and absences from work become a problem in terms of capacity and finding replacements to accomplish the work.
  4. Due to a lack of resources and attention, ongoing investigations have been discontinued.
  5. Budgets are cut for any activity deemed ‘non-essential.’

Significant job losses

  1. In the current climate, every firm is looking for ways to save money, and one of the most urgent solutions is to cut positions or reduce employee pay. As previous experience has shown, this may create an incentive for some employees to conduct fraud.

Examples of fraud schemes in the context of COVID-19

Using third-party vendors who were not thoroughly verified and screened

  1. Some employees colluded with unsavoury third parties for their personal gain.
  2. Duplicate invoices for work performed that have not been adequately examined and verified by the company;
  3. Due to temporarily weakened oversight, invoicing for uncompleted work may go undetected.
  4. Paying bribes or engaging in unlawful activities on the company’s behalf.

Misappropriation of Property

  1. COVID-19 fraud includesTheft of money;
  2. Larceny, such as warehouse theft;
  3. Data misuse/theft: the temptation for employees, particularly leavers, to copy sensitive data (client lists, pricing computations, intellectual property theft);
  4. Invoices are paid without the normal approvals. 

What are the questions that businesses should be asking?

Are your staff able to complete their daily activities from a distance? Is digital signature technology used? Can they approve processes without being constrained by physical limitations? 


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