cpd types

If you saw the recent figures from KPMG's fraud barometer, which showed fraud down from £1.1 bn in 2019 to £720m in 2020, you might be forgiven for thinking that at least one good thing has come out of the pandemic. All the more so when you heard that the number of cases of fraud had fallen in 2020 by 51%.

But these figures need to be read with a very big note of caution. We have been in some form of lockdown since March 2020 so there is now a huge backlog of cases to be dealt with due to courts being locked down as a result of COVID-19.

Roy Waligora, head of UK investigations at KPMG, says: "As we reflect on the 2020 fraud data, the brewing backlog of untried cases continuing to build up like water behind a dam cannot be ignored. Businesses and the general public must be cognisant of the fact that the drop in both the value and volume of fraud cases is not reflective of a downturn in economic crime, but rather fallout following the COVID-19 lockdown restrictions on the courts."

The reality is that we could start to see an increase in fraud as the result of the pandemic. Historically fraud becomes more prolific during a time of economic instability. Companies and their staff feel can begin to feel under pressure to face challenges that are brought from an economic downturn. As result struggling companies can for example, feel pressurised into falsifying their financial statements to meet earnings targets or secure financing. On top of this, fraud which already exists but has yet to be uncovered is more likely to come to light as companies need to pay more attention to their cash flow, or simply because fraudsters are finding their tracks more difficult to cover.

Many organisations have found themselves vulnerable to exploitation, and fraudsters do find opportunities to make the most of turbulent economic situations. Changes to the way we work, the demand for our attention to be elsewhere and a general sense of confusion, even chaos, on how to manage through this pandemic mean that we are more likely to be distracted from our fraud prevention frameworks, providing chancers with more opportunities than before.

So actually any stories we might hear about fraud being in decline as the result of this pandemic could be misleading.

When thinking about fraud and how to recognise it, and therefore prevent it, it's useful to remember the fraud triangle, a model that auditors commonly use to explain why fraud occurs:

  • Rationalisation
  • Opportunity
  • Incentive

You can find out more about the fraud triangle from CIFAS.

Understanding this triangle is a helpful tool when trying to ensure that you, or your clients, have the right fraud prevention processes set up in your organisation. The pandemic may mean fraud is on the increase for a while, so it's important we remain vigilant and ensure we have the correct processes and practices in place to protect our organisations, and those of our clients.

And while we are remaining vigilant about potential fraud, we might also keep on the look-out for dodgy statistics too!

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