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Occupational Fraud Occurrences Increase During a Crisis – Is Your Organization Prepared?

05.12.2020

Your employees are facing intense personal and professional pressure right now. Many businesses across the globe are shut down due to COVID-19, and full-year forecasts and budgets have been reduced. As a result, employees have received reduced hours/pay, furloughs, and/or layoffs, and many household incomes are down, which adds new and often unforeseen personal and professional pressures to employees. Pressure is one of three components generally present for an occupational fraud to occur, the others being opportunity and rationalization. The presence of each of these factors may rise in periods of economic hardship, according to the Association of Certified Fraud Examiners (ACFE).

We’ve Seen This Before

During the last economic crisis in 2008, the ACFE surveyed a sample selection of its member Certified Fraud Examiners, and 55.4 percent of respondents said that the level of fraud they investigated in their organizations increased in the previous 12 months compared to the level of fraud they investigated or observed in years prior. Further, 49.1 percent said the increase in fraud was a result of increased pressure. The study also found that almost 76 percent of the in-house CFE respondents indicated their organization either spent the same, or more, in preventative controls, all while generally cutting budgets and tightening spending in other areas. This is especially important as many organizations had to reduce full-year forecasts, slash budgets and cut their work force to make ends meet during the great recession. 

From a fraud standpoint, we are already beginning to see similarities to the great recession of 2008.  Many news outlets are reporting a rise in coronavirus scams, many of which mimic the 2008 financial crisis, and as time goes on, we’re likely to see more. The long-term effects of COVID-19 on the economy are still unknown. However, similar to the actions taken more than a decade ago, it’s important that organizations stay diligent in their fight against fraud during this time. Diligence includes continuing to invest in preventative controls to combat the current rise in pressure, opportunity and rationalization employees face.

For an additional resource, download a copy of the ACFE's The Importance of Anti-Fraud Efforts During COVID-19 and the Current Economic Environment.

ACFE’s 2020 Report to the Nations Now Available

The ACFE recently released the 2020 Report to the Nations, a study of the impact occupational fraud has on organizations throughout the world. Occupational fraud — fraud committed by individuals against the organizations that employ them — is one of the costliest forms of financial crime. Click here to download the report.

How prepared is your organization to fight fraud? Take our digital fraud prevention self-assessment to find out and discover ways to improve your fraud prevention and detection strategy.

To discuss a fraud prevention and detection strategy for your organization, contact Ron Steinkamp, Forensic Services Partner, at rsteinkamp@bswllc.com or 314.983.1238, or Jason Buhlinger, Forensic Services Principal, at jbuhlinger@bswllc.com or 314.983.1310.

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