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TECHNOLOGY REPORT

in 2022-23 for abusing the Bounce Back facilitated fraud across borders and can make it difficult to trace plier, vendor, subcontractor, neighbour
Loan Scheme. perpetrators.” or elsewhere.”
David Kearns, managing director of Another area of concern for Northage is the rise of ‘greenwash- Another cause for concern for Kearns
Expert Investigations, considers fraud to ing’, the practice of making exaggerated claims about an organisa- is the small firm. He says that “there can
be prevalent across all business sectors: tion’s environmental credentials and the sustainability of its be more vulnerabilities in a small pri-
“In 23 years of investigating employee products, services, and environmental impact. Most wouldn’t vately run business as it may not have
dishonesty it’s affected all sectors, think of this as out and out fraud, but it is and as he says, “with the resources to address potential attack
including manufacturing, services sec- focus very firmly on companies’ compliance with ESG require- risks.” He therefore advises businesses
tor, professional services, utilities, trans- ments, this is certainly an area to watch”. of any size to work from the ‘broad and
port and logistics, healthcare, etc.” And then there are the risks that follow on from the move to general to the specific’. He considers it
He adds that, according to the remote working patterns; this has affected the value of typical “negligent to believe ‘it will not happen
Association of Certified Fraud fraud prevention and detection measures “if,” as Northage com- to us’, ‘all of our staff are honest’, ‘we are
Examiners’ (ACFE) Report to the ments, “they haven’t been updated to reflect the change in work- a family business’. Over 23 years I have
Nations 2022, a worldwide report based ing practices post-pandemic”. heard this on a weekly basis only for a
on asset misappropriation fraud, “we do It shouldn’t be forgotten that fraudsters have become ever-more business to become a victim of employee
not know how prevalent fraud is as so sophisticated in recent years. Firms, reckons Northage, can be dishonesty and fraud.”
much is undiscovered, unreported and considered ‘at fault’ if they don’t put in place robust processes.
so not investigated.” He’s bothered that “not all companies have the necessary controls A typical fraudster and fraud?
For Northage, the pressures of the in place to effectively manage fraudulent activity from outside and When asked about a typical fraudster
economic climate on both businesses from within”. and fraud, Northage focuses on internal
and individuals, combined with factors Interestingly, Kearns refers to the ACFE report’s findings and or employee fraud. He prefers not to talk
such as the increasingly rapid rise of dig- says that “the latest report shows in 29% of cases there was a lack about a ‘typical’ fraudster as “even the
itisation and the move to more remote of control measures and in 20% of cases control measures were most diligent employee can become a
working patterns, continue to provide overridden – literally half of victims made themselves the victim”. fraudster if the conditions are right”.
Don’t let the bast**ds in motivation and opportunities to commit ing on from an employee identifying an opportunity to commit a Instead, he says that “there are certain
internal and external fraudsters with the
These figures, he says, have been consistent over the past 20 years.
Indeed, he sees the majority of employee-related frauds follow-
indicators that companies can look out
fraud against corporates.
for, based on the ‘fraud triangle’ of
And Kearns agrees. He sees new tech-
systems in place that prevent the fraud or those in place are not
nologies such as artificial intelligence fraud. This may be because, as he puts it, “there may be no control opportunity, motive or pressure (includ-
ing from a third party) and justification
making the commission of fraud easier, adequate and the employee simply overrides them”.
more targeted, and more convincing to He expands on this and notes that current and previous ACFE or rationalisation.”
unsuspected victims. He feel, however, reports have found that “where more than one employee is Similarly, Kearns says that fraudsters
that “the current economic crisis may involved in a fraud it takes longer to identity the matter and the don’t carry swag bags and neither do
well encourage those struggling to com- median loss is higher than an employee acting alone”. He contin- they wear a Zorro mask or striped top:
mit fraud, but as yet there is no evidence ues: “The majority of frauds I see are simplistic in their nature and “The ACFE report, based on 2110 cases
to support this”. That said, his private could have simply been prevented. Whilst systems are introduced from 113 countries, does not give any
view is that “employees may turn to and technology evolves there still remains an opportunity for an insight into the makeup of a fraudster or
fraud to assist in them continuing their observant employee to identify the weaknesses in control meas- dishonest employee – there is no typical
material-based lifestyle during the finan- ures.” fraudster or dishonest employee”. But
cially difficult time as they do not wish to for Northage, senior staff or those sub-
make personal sacrifices themselves”. Discovery ject to less managerial or other over-
The worrying part of fraud is that the majority aren’t ever dis- sight, and/or those with access to the
A question of opportunity covered – at all. PwC’s Global Economic Crime and Fraud Survey company’s financial systems or key
The opportunities for committing 2022 noted that “51% of surveyed organisations say they experi- assets, are more likely to fall within the
fraud in a corporate environment enced fraud in the past two years, the highest level in our 20 years higher risk category, together with dis-
depend to a large extent on where the of research”. But what of the other 49%? Are they really trouble- gruntled employees or those working
areas of weakness are in structures and free? Here Northage says that fraud “is typically [discovered] their notice period. He says:
defences. through the measures that businesses have in place as part of their “Behaviours to look out for include per-
For Northage, typical frauds include internal controls – not necessarily related to fraud detection – sonal or financial problems or unusual
cybercrime, business impersonation such as audits, and also as a result of whistleblowing”. spending habits, being secretive about
fraud, supplier/supply chain fraud, He adds, “generally, the larger and more sophisticated the com- their work, working long hours and/or
mortgage fraud, employee fraud such as pany, the greater the awareness and scrutiny”. not taking holidays, paying more atten-
payroll fraud and false accounting, and Kearns backs Northage’s assertion and suggests that 42% of tion than usual to a particular company
money laundering. He adds: “The cases are in fact discovered by tip off with a third of those coming customer or supplier, and becoming
increasingly rapid rise of digitisation has from employees. His key advice? “Do not ignore a tip from a sup- aggressive when challenged.”

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