Fraud During the Coronavirus (COVID-19) Crisis

There are so many things to be worried about with the COVID-19 pandemic. First and foremost is the health of our family and friends. But let’s not kid ourselves: The health of our economy is important too. People are already out of work, and many more may be out of work in the weeks to come. There are so many uncertainties.

Since I do fraud investigations for a living, fraud is something I’m thinking about a lot. And the fraud risks during this time of uncertainty and economic distress are great!

There are a few reasons for this:

  1. Many companies have reduced the size of their workforce. The fewer people working, the more difficult things become. There may be increased workloads, which is stressful. There is also often reduced supervision. This creates greater opportunities for fraud to happen, and likely impacts whether or not it will be detected timely.
  2. Working remotely is a great option if it is possible in your company, but it also creates opportunities for fraud. This is again related to reduced supervision of employees.
  3. Employees are facing greater financial pressures. This could lead otherwise honest employees to turn to fraud. They may tell themselves they’re just “borrowing” the money. They may justify a theft because of a dire need.

What can you do:

  1. Make sure you still have checks and balances in place. The easiest one is supervisory review. If an employee is responsible to pay a bunch of vendors today, have a supervisor review those payments. Look at supporting documentation, verify amounts, and verify that the payments went to the right vendors.
  2. Another check and balance: segregation of duties. This is a fancy-sounding phrase for splitting tasks between multiple people. Take the process of receiving customer payments, for example. Have one person receive the payments and record them in the accounting system. Have a different person take the deposit to the bank. Have a third person reconcile the bank account each month. If one person did all three of these tasks, it would be relatively simple to steal money and cover it up. By having three separate people involved, you greatly reduce the chance of theft, and greatly increase the chance of discovering it early if a theft does occur.
  3. Be mindful of the pressures your employees face. Do what you can to be sensitive to the precarious financial situation many people are in. I realize, of course, that many businesses are on shaky financial footing too and may not be able to do much about that. So just be aware.
  4. Look for signs that an employee could be engaged in nefarious behavior. Things like arriving before everyone else or leaving after everyone else are warning signs, especially if this is out-of-the-ordinary. Pay attention to changes in behavior. Here’s an article on some of the personal red flags of fraud you can look out for.

The last thing we want to do during a difficult time like this is be suspicious of our employees or wrongly accuse someone of theft. But the sad truth is that the risk of fraud goes up when times are tough, and it makes sense to be more vigilant.

1 thought on “Fraud During the Coronavirus (COVID-19) Crisis”

  1. Tracy, from one fraud fighter to another I couldn’t agree more with your above excellent warnings. The hard part is will they listen. Too late to hear I shouldaa, wouldda, couldaa’s. Fraud prevention as well as Fraud detection is always something I will forever be passionate about.

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