Financial fraud increased steadily over 2020 and is expected to keep rising this year, the Association of Certified Fraud Examiners (ACFE) said in a report.
“There is little doubt that the effects of COVID-19 will linger well into 2021,” said the report, which compiles input from internal and external fraud examiners. “Factors stemming from the global pandemic have altered organizations’ fraud risks and anti-fraud programs.”
In May 2020, 25% of examiners reported a significant increase in fraud. That figure grew to 34% by August and then to 38% by the end of the year. When moderate increases in fraud were included, the numbers jumped substantially more. By the end of last year, 79% had seen fraud go up.
The shift to remote work and the financial pressure on pandemic-hit companies and individuals are a recipe for increased fraud, Julie Bell Lindsay, executive director of the Center for Audit Quality, told CFO Dive earlier this year. Lindsay’s organization wasn’t involved in the ACFE report.
"You certainly can see pressure,” Lindsay said.
Security experts look for what they call a fraud triangle — a convergence of pressure, opportunity and rationalization — that typically signals a rise in illegal activity even among people who wouldn’t otherwise commit fraud.
"This is where all of this comes to a head," she said.
The biggest challenge for preventing problems is the travel restrictions companies faced, the ACFE report found. By August, 43% of fraud prevention specialists cited that.
In place of on-site meetings and oversight, staff have been forced to conduct interviews remotely, with limited access to evidence.
On the positive side, 41% said anti-fraud budgets increased over the year and 38% hired more people to fight the problem.
Of 12 types of fraud the report tracked, all rose, with cyber fraud rising the most. By the end of last year, 52% of examiners said it had risen significantly. Payment fraud also saw a jump, with 35% saying it went up significantly.
This year isn’t expected to be much better: 57% expect cyber fraud to rise significantly and 43% say the same of payments fraud.