An important COVID-19 fraud update from the Fraud & Forensic Services team at RSM
Amid widespread public concerns over the rapidly changing COVID-19 situation, fraud, corruption and workplace misconduct risk is heightened. There has been an escalation in fraud related to the COVID-19 pandemic, which puts businesses at risk of further loss and reputation issues.
Now is not the time to ignore governance, risk and compliance measures designed to mitigate these risks but for management to be ever-vigilant and take action like conducting an RSM COVID-19 pandemic anti-fraud/corruption and workplace misconduct review. It was not until these crises are over (like the 2008 global GFC) when the fraud skeletons emerge. Be proactive!
This article identifies:
Why be alert (not alarmed),
What are the known COVID-19 fraud scams,
How we are still delivering Fraud & Forensic Services to clients albeit differently,
What businesses can minimise these risks, and
How we can help with our RSM COVID-19 fraud, corruption and workplace misconduct review.
Together we can still mitigate fraud, corruption and workplace misconduct risks in a COVID-19 environment.
Why be alert, not alarmed, to fraud, corruption, and workplace misconduct during the Coronavirus pandemic?
The global and local Coronavirus (COVID-19) pandemic has created many changes to our workplaces and the way we do business. This also brings along new or heightened risks including the risk of fraud, corruption and workplace misconduct that will further impact a business’s performance.
This resulting potential financial and/or reputation loss will be felt by the business regardless if your business is global or local, or private sector / a company or a government organisation. The following is what we know about the impacts from similar global events (such as the 2008 Global Financial Crisis or GFC, and natural disasters) of fraud, corruption and workplace misconduct about these times from similar events:
Fraudsters will prey on business and individuals in times of crisis, hoping the usual internal control defences and professional scepticism are down
Internal controls may be circumvented in times of crisis for the reason of expediency to keep business processes operating, but they are the same circumstances that fraudsters exploit
Management review may not be as vigilant due to being distracted by the crisis and other management responsibilities
- The best insights into circumstances leading to fraud, corruption and workplace misconduct are found in the classic fraud triangle as originally espoused by criminologist Dr Donald R. Cressy in the 1950s but still as relevant today.
For fraud, corruption or related workplace misconduct to occur there are three elements present - motive, opportunity and rationalisation.
In times of crisis, an employee(s) may exhibit financial stress or hardship as a result of job losses from household members during the current COVID-19 pandemic, or even from fear of their own job loss (even if only a perception or fear, and not a reality). These stresses may motivate fraudulent behaviour.
Known COVID-19 fraud and similar scams
The following are some of the current COVID-19 scams which we are monitoring and change daily:
- Outright theft or obtaining fraudulent benefits by employees stealing funds from the business for a perceived motive as part of the fraud triangle, such as from internal control weaknesses within business processes like, accounts payable, accounts receivable, payroll, awarding work to suppliers, etc.
- Phishing scams. Phishing is a fraud method of sending emails or texts claiming to be from reputable or official sources (such as health advice, government, vendor sources) for the purposes of getting the recipient to reveal personal or company confidential information such as passwords, banking details etc. COVID-19 phishing scams can include fake government financial relief for business, and fake business travel and expenses refunds.
- Investment scams claiming the Coronavirus has created opportunities that are too good to be true because they are too good to be true or do not exist!
- Counterfeit or non-existent COVID-19 equipment, such as anyone selling products that claim to prevent, treat, diagnose, or cure COVID-19, or counterfeit products such as sanitizing products and Personal Protective Equipment (PPE), including masks, goggles, full face shields, protective gowns, and gloves.
- Fake online shopping sites requesting unusual payment methods such as upfront payment via money order, EFT, international funds transfer, preloaded card or electronic currency, like Bitcoin.
- Unsolicited Coronavirus related emails, which could be from reputable sources such as a government department, inviting the recipient (such as someone in finance) to click on a link or open an attachment which unbeknown to the employee will infect their computer and compromise the computer network of the business.
- False vendors being added for later fraudulent payments.
- Employees working from home but a considerable amount of the ‘work time’ is spent on non-employer related activities, resulting in low to no productivity. It is recognised that the majority of employees will work responsibility unsupervised as often output work can be monitored by who is monitoring or investigating concerns!!!
- Scams to organise the early release of superannuation, especially in self-managed super funds (SMSFs) for you to access the money, with getting superannuation funds early illegal, except in very limited circumstances.
There are useful government sites which provide updates on COVID-19 scams with methods changing and emerging daily. In Australia, one such site is currently the ‘Coronavirus (COVID-19) scams’ on the Australian Competition & Consumer Commission (ACCC) website Scamwatch page. An example of a global site is the information updates from the U.S. Federal Bureau of Investigation (FBI).
For further information:
Do you have any question, or require assistance, in fraud related issues?
Get in touch with Roger Darvall-Stevens, National Head of Fraud & Forensic Services at RSM for more information.
Roger is the Director and National Head of Fraud & Forensic Services and has over 25 years of experience in forensic investigations and forensic accounting, fraud, bribery and corruption control, related training, forensic IT, compliance (including foreign bribery and corruption risk), and corporate security.