How financial crime has adapted to COVID
4 February 2021: More than half of UK firms have been affected by economic crime over the past two years as criminals rapidly adapt to the new business landscape, according to research presented at the Virtual Fraud Conference.
PwC’s Global Economic Crime Survey found that economic crime reached its highest level in the past 24 months, with 56% of UK businesses surveyed stating that they were impacted by fraud, corruption or other economic crime.
Presenting at the Virtual Fraud Conference 2021, PwC’s research outlined that times of political uncertainty often open up new opportunities for fraudsters to pinpoint or exploit gaps in controls.
The survey garnered more than 5,000 respondents across 99 territories on their experience of fraud over the past 24 months, and also found that 39% of respondents lost an opportunity to a competitor they believed paid a bribe. In addition, 28% cited cybercrime as the most disruptive type of fraud, followed by accounting fraud and customer fraud.
Fraudsters ‘rapidly adapting’
“Unlike in previous years, fraudsters have changed very rapidly and adapted to the new circumstances”, speaker Russell Smith, Professor of Business Government and Law at Flinders University in South Australia, told the Virtual Fraud Conference.
“Just as an example in Australia, by 1 March 2020, shortly after the pandemic was getting started, there were already 22 COVID-related scams reported by that point – this was at a time when there were only 27 COVID cases in Australia.”
Smith added: “There have now been over 5,000 COVID-related scams reported to the regulators in Australia.”
Heightened risk environment
Sofia Dems, Anti-Money Laundering and Counter Financing of Terrorism Officer at the United Nations Office on Drugs and Crime was also a speaker at the conference. Dems said: “While government have been challenged by organised crime groups, they can expect challenges in recovery packages. So, the risk of identity fraud, benefit fraud and embezzlement are higher.
“When it comes to anti-money laundering, we identified several key risks – the changing of financial behaviour has become difficult to identify and difficult to perform due diligence.”
She continued: “Reporting and supervisory authorities had to adapt their controls during these periods of remote working, and with the financial volatility and economic contraction we see new risk arising - businesses in distress are vulnerable to infiltration by organised criminal groups.
“Businesses need liquidity and organised crime groups have this so they are more likely to target companies and sectors that will generate future possibilities of laundering illicit profit.”
Fighting cybercrime with AI
The third speaker on the panel for this section of the conference - Graeme Biggar, Director General at the National Economic Crime Centre, National Crime Agency - said artificial intelligence has the potential to combat cybercrime, effectively turning the fraudsters’ own weapons against them.
Biggar said: “There is an enormous amount of data out there and if we use it intelligently then we can make a really big difference. If we could also begin to merge this with bank transaction data - as banks are getting much more sophisticated in their transaction monitoring – we will be better able to spot individual frauds or money muling.”
He concluded: “If we could begin to do this across institutions and alongside law enforcement then we could really make big steps forward.”
Run by the Fraud Advisory Panel, R3 and INSOL Europe, the Virtual Fraud Conference considered key emerging fraud threats facing businesses and consumers as the UK moves through the pandemic and potentially beyond.
The conference ran from 2-3 of February, and anyone who missed the chance to attend live can buy tickets to watch the sessions on-demand until 2 April 2021.