Fraud in times of crisis


By Marc McAuley, CIPFA Head of Counter Fraud

There have been many historic events that have impacted the financial wellbeing of individuals, companies, our country and the world as a whole. From world wars to market crashes, when an event that is out of our control occurs we are not always well prepared.

In the aftermath of a crisis many of us will go into survival mode. We may panic, suffer fear of the unknown, become anxious or even do nothing. But whatever our initial reaction, most of us rarely consider committing fraud.

However, as a fraud professional for over 20 years, I am well aware of the lengths organised criminals will go to, but even I was shocked by the actions of opportunists to take advantage in times of crisis. 

In the aftermath of the Grenfell fire, the council and charities made millions of pounds available to those affected. Large amounts of money began to change hands, and millions were lost to fraud. Fraudsters are willing to take advantage of any situation, regardless of severity or the loss of life, or of how they will be perceived or the consequences of their actions.

Fast forward almost three years and onto another crisis – coronavirus. The world has been brought to its knees by a pandemic that is affecting every aspect of our lives. Our finances are suffering, jobs are at risk, and we can’t even buy essential, everyday grocery items from our local shops. Global market values are falling with trillions being wiped off share values and government borrowing ramped up to wartime levels. Measures are being put in place to help companies survive difficult times, to prevent mass redundancies and ease the overall impact on business.

Locally, councils and charities are raising funds to help the most vulnerable and relying heavily on the assistance of volunteers to distribute aid, while large numbers of staff are self-isolating or sick. There may not be time to conduct checks on volunteers, or verify the credentials of those who present themselves as needing assistance. But we must learn from past mistakes and ensure our controls are more robust than ever, especially considering the level of aid being made available.

Even under business as usual circumstances, fraud is a major threat to councils and public services. New research by CIPFA found that 64% of senior council officers view fraud as a major problem, while over half of those surveyed (52%) thought fraud was increasing. More than a third (34%) of respondents felt that financial losses to fraud were high, while just under half (45%) reported fraud levels being under-reported in their organisations.

These findings were under normal circumstances. With the increased number of personnel self-isolating or sick, and the increased strain on services like public health and social care as confirmed cases of coronavirus reach their peak, the threat increases on a daily basis.

News outlets are already reporting coronavirus scams, from emails to the elderly offering assistance with shopping while they self-isolate, to companies selling products that never arrive. So when the government makes billions available in tax relief and salary contributions, what can we expect? Firstly we can’t expect those in need to wait for assistance - they need it now. But we must expect fraudsters to take advantage, whether they are opportunists or organised criminals.

As a community we must protect the vulnerable, and as individuals it is vital that we protect ourselves. We need to know who we are employing or procuring services from, conducting appropriate due diligence checks on staff and volunteers to minimise fraud and safeguarding risks. We should know who we are giving assistance to. We should stay alert to red flags and carry out the necessary checks in a timely manner. We must ensure we are alert to cyber-crime, not clicking on links from unknown sources, especially if they are sent in an email.

CIPFA’s code of practice on managing the risk of fraud and corruption outlines key principles, including acknowledging the risk of fraud in the first instance. Once risk has been acknowledged, organisations should look to identify the specifics and develop an appropriate counter fraud and corruption strategy, ¬≠providing resources and taking action in response to fraud and corruption.

Managing the risk of fraud during a crisis is not easy, but there can be no excuse for making the same mistakes over and over. We must take what we have learned in the past, even from bad experiences, and ensure we take every appropriate action to prevent it from happening again.

This article first appeared in the MJ.

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