Knowledge and Insights

The world is slowly returning to some sense of normalcy, travel is resuming, kids are heading back to the classroom, and retailers, restaurants, and cultural arts centers are greeting us (and our pocketbooks) with open arms. While COVID-19 may have brought many of us a new, or renewed, passion for banana bread and sourdough, for some it also brought a sudden awareness of the fraud happening right in our own backyard.

The Association of Certified Fraud Examiners (ACFE) surveyed anti-fraud professionals around the globe and recently published a report on their findings entitled, “The Next Normal: Preparing for a Post-Pandemic Fraud Landscape”. The survey found that 51% of organizations have uncovered more fraud since the pandemic started, and 71% expect the level of fraud impacting their organizations to increase over the next year.

Not surprisingly, the types of fraud expected to take an upward turn include cyber fraud, social engineering, identity crime and unemployment fraud. To a lesser extent, employee embezzlement, bribery and corruption, and financial statement fraud occurrences were predicted to remain mostly unchanged or increase slightly.

As if we didn’t live in a technology driven world before the pandemic, COVID-19 created an even heavier reliance on technology, introducing remote work to numerous businesses (and expanding it in others) as well as generating an inundation of email traffic from all types of organizations trying to keep or earn your business. Unfortunately, this surge of online work comes with an influx of fraudsters trying to steal data, interrupt business, or compromise data security in general. Not to mention, a data-weary employee is more likely to let down their guard and unknowingly click on phishing links or inadvertently provide information enabling identity theft. Additionally, opportunities for crimes that require a more hands-on participation from the fraudster, like embezzlement, theft, and bribery, are less likely (but certainly able) to occur while human interaction is limited and access to unguarded computers is virtually nonexistent.

The report goes on to say, “The pandemic has fundamentally changed the way many businesses operate and how consumers behave, while also prompting actions by governments worldwide to address the pandemic’s impact through regulatory changes and stimulus programs. These and other factors related to the COVID-19 pandemic have in turn affected the fraud risks affecting organizations”. The factors that had the greatest effect were the shift in business operations (i.e., remote work) and changing consumer behavior, both of which are expected to remain the top risk factors in the coming year. The study also notes that, “More than half of respondents believe that enhanced fraud risk awareness and increased collaboration across the organization are necessary to be more effective post-pandemic”.

Now is a good time to conduct an internal control and risk assessment. By taking the steps now to identify risks in the current environment – which may be quite different from your pre-pandemic environment – and rating the likelihood and impact of a risk event, you are minimizing future damage that could be caused by a gap between risks and controls. What worked for you pre-COVID-19 may not be working for you now, especially with a new remote or hybrid workforce in place. We also suggest reviewing your employee handbooks and other policies and procedures, making sure they are up-to-date and reflect the current landscape of your workforce and relevant expectations.

Whether you need an independent look at your internal controls and risks or think you may have uncovered wrongdoing during your own assessment, Mercadien’s Forensic & Litigation Support team can help. When working with our highly experienced and credentialed team, you’ll benefit from our decades of expertise, abilities and resources, particularly in documenting and imparting valuable information to relevant employees, your board of directors and external constituencies. And if you suspect potential wrongdoing, our extensive experience working closely with counsel, analyzing data and interviewing witnesses allows us to discreetly and expeditiously uncover critical facts and information that will help you understand any issues and related exposure. For more information on the services we provide, please contact Frank Pina, CPA/CFF, CFE, CGMA, Managing Director at [email protected] or 609-689-2319.

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.