Fraud Exposures - Is Your Business at Risk?

Submitted by HGIT on Tue, 02/15/2022 - 20:21
Fraud Exposures

In 2020, Coronavirus transitioned the workforce to go remote. Cybercriminals took advantage of this opportunity to profit from our dependence on technology to go on an Internet crime spree.

The Increase in Fraud

Although fraud has always been a problem, it appears to be getting worse. In 2020, the Federal Trade Commission received more than 2.1 million fraud reports from consumers. Consumers reported losing more than $3.3 billion to fraud, a significant increase compared to 2019, when consumers reported losses of $1.8 billion.

The Ascent says that the pandemic has contributed to increased reports of identity theft and credit card fraud. Incidents of government documents or benefits fraud increased by 1,663% in 2020, while credit card fraud increased by 44.7%.

Sophisticated Schemes That Target Businesses

Consumers aren’t the only ones who need to worry about fraud. Businesses are also frequently targeted. The ACFE’s 2020 Report to the Nations on Occupational Fraud and Abuse estimated that global organizations lose around 5% of their annual revenues to fraud.

Early on in the pandemic, the FBI warned about an increase in Business Email Compromise (BEC) schemes. These schemes typically target an individual at a company with a series of emails that appear to be from a legitimate contact, often in order to trick the individual into making a wire transfer. The Internet Crime Complaint Center received 19,369 complaints about BEC schemes in 2020, with adjusted losses of more than $1.8 billion.

Remote work arrangements may have contributed to the increase in BEC and phishing scams against businesses. Because remote workers are not in physical contact with anyone, it is easier for fraudsters to impersonate coworkers, vendors, and clients. At the same time, the upheaval caused by the pandemic meant that workers might not second guess requests for sudden changes to procedures.

Technology is also helping fraudsters. Deepfake and voice-cloning tools are especially concerning. Forbes reports that a bank manager in Hong Kong was duped into making transfers by a fraudster using an AI voice cloning tool. In March 2021, the FBI issued a private industry notification about AI-generated synthetic content, such as deepfakes, warning that malicious actors are expected to use these tools in foreign influence and cyber operations, including spear-phishing and social engineering schemes. 

Could You Be the Next Victim of Fraud?

The ACFE has a Fraud Prevention Check-Up that you can use to make sure you’re not leaving your organization vulnerable. It’s a thorough check-up that requires collaboration between people in the organization who are knowledgeable about the operations and an independent fraud specialist who can be objective. Their website also offers a variety of free fraud prevention resources.

Have questions about your company’s fraud exposures?

Contact us to speak with a commercial insurance broker in your market niche.

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