Anti-fraud professionals are anticipating a rise in fraud this year after seeing it go up since the beginning of the COVID-19 pandemic last year.
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The pandemic has opened up risks for fraud, with many employees forced to work remotely from home, exposing access to financial and accounting systems at any hour of the day or night from insecure home offices, and making it more difficult to visit offices and audit financial records in person. Many organizations have responded by increasing their use of technology to safeguard against fraud and do audits remotely, but there are still challenges with the technology itself.
“The most common pandemic-related challenges facing anti-fraud programs are changes to investigative processes and changes in the control/operating environment,” said the report.
As the U.S. and other countries emerge from the pandemic, there will be other challenges confronting them. “Shifts in business operations and changing consumer behaviors are the top two risk factors expected to impact the fraud risk landscape in the coming year,” according to the report.
In the early months of the pandemic, anti-fraud professionals were already anticipating an increase in fraud. For a report released last year, the ACFE surveyed them in May 2020 and found that 93% of the respondents expected an increase in the overall level of fraud during the coming year. The level of fraud awareness has only grown since that period of the pandemic. More than 60% of respondents have observed a significant or slight increase in their organizations’ fraud awareness, and only 7% indicated it has decreased.
Anti-fraud professionals have been using remote technology to work together in their efforts to fight fraud. “The key things are having a good platform, having secure VPN access for your investigators and having a file transfer portal for people to share documents,” said Erik Lioy, a partner at the accounting firm Dixon Hughes Goodman and a member of DHG’s forensic and valuation services practice, during a presentation at the ACFE conference. “For a block of time, we would all just connect via Zoom, even if we didn’t need to talk. I think we’re all used to being in a conference room, so we’d all be connected and, if somebody had a question, they didn’t have to call somebody or send them an email. They could just say, ‘Hey, I’m looking at what you did for me. Could you explain this again or walk me through this?’ We found that really effective. You don’t want to do that eight hours a day or five days a week, but for a few hours a couple of days a week, it was a really effective way to mitigate being separate.”
Now as the country begins to emerge from the pandemic, they’re able to meet in person. “My team has all been vaccinated,” said Lioy. “We’re actually getting together and whiteboarding in conference rooms a lot more often.”
Fraud investigators can spot some telltale signs of fraudulent behavior. “Sudden lifestyle changes of procurement personnel could be indirect signs that they may be receiving certain bribes, or types of gifts and payments,” said Hyung Kim, a senior investigator at the World Intellectual Property Organization, during another ACFE conference presentation. “Vendor irregularities and phantom vendors are another commonly seen behavior. Perpetrators can use phony shell companies to bid for contracts or create the appearance of competition. This type of action actually appears in procurement services and consumables that are standardized and easily or readily available. Some indicators of possible vendor irregularity include a lack of vendor information on global listings or on the internet, missing contact details, or the use of a P.O. box or a noncommercial address. It’s also important to check the contact information or address provided by vendors because, in some cases, you will end up finding that address is a shop that’s selling general goods or even a restaurant or an empty warehouse or a private residence.”
Anti-fraud professionals can find themselves coming under pressure when they try to point out potential wrongdoing, even when it’s part of their job in the government. “My team came under a huge amount of pushback, and this included people suing me left, right and center,” said Thuli Madonsela, the former public protector of South Africa, and currently a professor at Stellenbosch University, during a keynote address at the ACFE conference. “They sued me for perjury, which is lying in court. When you lie about facts, you can’t lie about law because only a judge can determine what the law is.”
She was pressured to say she had changed her mind, even by the anti-corruption authorities during one particularly difficult case. She had always believed the powers of the public protector were binding and that she had the duty under the South African constitution to investigate and report corruption and take appropriate action. “My take was that taking appropriate action means you can recommend or order,” she said.
She and her team all agreed that was the proper reading of the constitution. Madonsela is one of the drafters of the South Africa constitution and helped draft several laws to build South Africa’s democracy. As a full-time commissioner of the South African Law Commission, she supervised several investigations focusing on aligning all laws with the constitution.
“The choice we all have to take sometimes is to look good or be good, and in this case we chose to look bad but do what we thought was the right thing,” she said.
Anti-fraud professionals need to be able to work collaboratively, whether they’re at the same firm or at different organizations around the world. “We’re in a community just like the fraudsters are in a community,” said Brian Davis, a fraud manager at the e-book publisher Scribd, during another presentation at the ACFE conference. “We’re not alone in this fight, and we can work together and share different tips, tricks and ways to go about it, ways to help build your team, ways to build up your fraud program, in order to combat theft. We really are in this together.”
