The Australian Commonwealth, defines fraud as a crime where someone dishonestly obtains a benefit or causes a loss by means such as deception.
Fraud may also involve activities such as:
- accounting fraud (e.g. false invoices, misappropriation)
- misuse of credit cards
- unlawful use of, or unlawful obtaining of, property, equipment, material or services
- causing a loss, or avoiding and/or creating a liability
- providing false or misleading information to the Commonwealth, or failing to provide information when there is an obligation to do so
- misuse of assets, equipment or facilities
- cartel conduct
- making, or using, false, forged or falsified documents
- wrongfully using information or intellectual property.
Fraudsters are increasingly finding direct methods to dishonestly benefit from a company’s clients, causing financial and reputational losses to companies across industries. For instance, in banking, fraudsters are increasingly using digital platforms and phishing websites to target victims directly, avoiding banks’ security measures. As such, fraud recovery is often-times, an extremely complicated and time-consuming process. CommBank reports that digital fraud has been on the rise. The most common types of digital fraud seen by the CommBank Digital Fraud team includes:
- Phishing (aims to manipulate victim into things such as revealing personal information or/or transfer money)
- Malware (viruses, software, or attachments designed to target online banking on computers or mobile devices to redirect transactions without victims knowledge)
- Porting (transfer of victims mobile phone number from one service provider to another. Once the fraudster has access to victims messages, they can retrieve one time passwords and make payments via their online banking account)
- Identity take-over (action of taking over victims identity to access current banking or create new bank accounts and loans. This usually involves obtaining a full name, date of birth, and address and passing identity verification over the phone to update online banking login details)
According to the PwC’s Global Economic Crime and Fraud Survey, the average company experienced 6 incidents of fraud over the past 24 months. This is the second highest reported level of incidents in the past 20 years. This is largely due to the changing business patterns, working styles and ever changing technology.
The negative effects of fraud can trickle down to customers and clients, leading to reputational damage on top of financial repercussions. As such, it is important for companies to set measures to tackle and protect from fraud, now more than it ever was.
Fraud has a corrosive and far-reaching impact as it continues to affect millions of individuals, companies and their clients across industries. However, fraud can take many forms, and come from both inside and outside a company’s walls, and can be difficult to predict. Reading our 4-part series on Workplace Fraud can help you uncover, investigate and prevent workplace incidents and misconduct:
- Asset Misappropriation
- Financial Statement Fraud
- Data, Intellectual Property and Identity Theft
This blog will primarily focus on fighting against external threats which are ever-increasing in numbers and complexity. This blog will break the topic down into the following sections:
- What makes Fraud a Challenging problem?
- Fraud Recovery Statistics in Australia, US and UK
- Top 6 Fraud Prevention Tips for Companies
What makes Fraud a challenging problem?
According to the Attorney-General’s Department of Australia, here are some of the key reasons why fraud is such a challenging problem.
Fraud is common
According to the Australian Institute of Criminology, there are tens of thousands of instances of reported fraud and corruption against the Commonwealth each year. The prevalence of fraud makes it a challenging and a costly problem for governments to deal with.
Criminals and scammers are adopting new technology and more advanced methods to commit fraud.
Fraudsters are diverse, creative and adapt quickly
Those who commit fraud are diverse, creative and adapt quickly
They range from people taking advantage of opportunities to those who actively look to exploit government programs. Fraud is a profession for some. Their job and expertise is to examine government programs and find creative ways to exploit those programs.
Serious and Organized Crime is Involved
Criminals use advanced approaches and schemes with professionals, such as accountants, to exploit multiple government programs.
Fraud Recovery Statistics in Australia, US and UK
According to PwC’s Global Economic Crime and Fraud Survey, there is a clear link between investment made upfront, from technology such as anti-fraud programs and capabilities, to resources and programs, and reduced cost when fraud strikes. For instance, globally, companies with dedicated fraud programs reportedly spent 42 percent less on response and 17 percent less on remediation than those with no program in place.
Fraud Statistics in Australia
According to a PwC research, of the Australian respondents who had been impacted by fraud in the past two years, some 60% said the experience had helped them to streamline their operations, 50% to embrace new technology, and 43% to ensure incidents were reduced subsequently.
Less positively, when it comes to implementing or upgrading technology to combat fraud, Australian companies still find it more difficult than those elsewhere to make the business case for such investments. When asked what factors were preventing them from implementing technology to prevent fraud, over one in four (26%) of the Australian respondents identified cost as the biggest barrier into implementing it – in line with 27% globally. The resulting relatively low level of investment in anti-fraud measures, programs and technology emerges repeatedly in PwC’s research.
Fraud Recovery Statistics in Australia
Between March and June 2020, the Attorney-General’s Department’s Commonwealth Fraud Prevention Centre and the Australian Federal Police (AFP) established a temporary Commonwealth COVID-19 Counter Fraud Taskforce under Operation Ashiba. The taskforce included a range of entities across the Commonwealth such as:
- Australian Criminal Intelligence Commission (ACIC)
- Australian Securities and Investments Commission (ASIC)
- Australian Transaction Reports and Analysis Centre (AUSTRAC)
- Department of Agriculture Department of Defence Department of Education, Skills and Employment
- Department of Health
- Department of Social Services
- National Disability and Insurance Agency
- Services Australia
The taskforce works in partnership with other agencies including:
- Australian Competition and Consumer Commission (ACCC)
- Australian Taxation Office
- State and territory law enforcement
The taskforce aimed to tackle fraud against COVID-19 economic stimulus measures. It aims to:
- Provide advice and guidance to Australian Government entities to build in countermeasures in policy, program and system design to counter fraud risks for the new COVID-19 economic stimulus measure and intelligence sharing across the Commonwealth and internationally to enable detection and disruption of fraud
- Equipped Australian Government entities with deterrence messaging to help build fraud awareness and prevention in government communications, and to explain the consequences of committing fraud into their communications.
According to the Australian Institute of Criminology, the total amount of money recovered increased from $631,800 in 2018 to $879,463 in 2019. This increase was also reflected in the mean (up from $817 in 2018, to $1,217 in 2019), although the median amount recovered remained the same ($200).
The total of amounts recovered in 2019 for the most serious occasion of personal information misuse in the last 12 months was $803,367, 41 percent more than 2018 ($569,342; see Table 16). The mean amount of money recovered in 2019 also increased ($1,035 in 2019 vs $730 in 2018). However, the median amount recovered remained the same at $200.
Fraud Statistics in the United States
Findings show that customer fraud, cybercrime, and accounting fraud are the top 3 types of fraud reported. The most significant increases were seen in customer fraud (from 28% in 2018 to 39% this year); accounting fraud (21% to 30%); and bribery and corruption (16% to 22%).
It seems self-evident, but the best way to avoid getting embroiled in a new fraud is to investigate and learn from the last one. Yet, according to PwC, 50% of US companies did not conduct an investigation after the last major fraud. And barely one third reported it to their board. Regulators—and, increasingly, the public—are demanding more. Reacting too slowly can not only result in more immediate damage, it can also cascade into a broader crisis.
Similarly to Australia, data shows a clear link between investments made in fraud prevention on the front end, and the cost savings gained on the back end. Companies that have a dedicated program for their most disruptive type of fraud spent less overall than those who do not have a dedicated program in place.
Sometimes the ROI of fraud preparedness is measured less tangibly—but no less importantly—in terms of positive outcomes. Nearly half (45%) of all global respondents who have experienced an economic crime say they emerged in a better place—citing attributes such as an enhanced control environment, streamlined operations, fewer losses, and improved employee morale.
Fraud Recovery Statistics in the United States
The Department of Justice reported total recoveries of $2.2 billion for the fiscal year ending September 2020. These recoveries represent the lowest reported DOJ recoveries since 2008.
While it is the decline in recoveries that stands out, the 2020 DOJ fraud statistics do share some things in common with prior years. First, whistleblowers were again critical to DOJ’s recoveries. Of the $2.2 billion recovered, nearly $1.7 billion – 76% — was recovered in cases initiated by whistleblowers under the False Claims Act.
This percentage represents an increase from prior years, demonstrating the continued importance of whistleblowers. Second, as in prior years, healthcare fraud accounted for the majority of funds recovered: of the $2.2 billion recovered, nearly $1.9 billion – 83% – was attributed to healthcare fraud.
Fraud Statistics in the United Kingdom
Economic crime has 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. This figure is the highest in the history of the 20 year PwC research and well above the global average of 47%.
The top 5 types of frauds according to UK respondents were:
- Customer Fraud
- Accounting Fraud
- Bribery and Corruption
- Human Resources Fraud
Looking across the evolving landscape of fraud, what is causing the most disruption to organisations? In the UK findings of PwC’s studies, cybercrime was stated to be the most disruptive by 28% of respondents, up from 25% in 2018. Accounting fraud almost doubled from 8% to 15%, and customer fraud held onto third spot at 13%.
The same findings show that companies that have a dedicated fraud program in place generally spend less, relative to revenue, on response, remediation and fines. However, setting up such a program is just the start. Once the program is in place, periodic assessment and continuous evolution are key.
According to KPMG, the number of alleged fraud cases being heard in UK courts in the first half of 2021 has almost doubled compared to the same time in 2020, as UK courts saw continued recovery in the system following COVID-19 lockdowns.
Businesses are now also being increasingly targeted due to their larger financial transactions and the greater potential profits for fraudsters. Aside from the financial costs, being a victim of fraud can cause serious reputational damage for businesses. Concern about adverse publicity probably contributes to under-reporting.
The National Economic Crime Centre (NECC) 2017 Annual Fraud Indicator estimates fraud losses to the UK at around £190 billion every year, with the private sector hit hardest losing around £140 billion. The public sector may be losing more than £40 billion and individuals around £7 billion.
Remote banking fraud losses are organised into three categories: internet banking, telephone banking and mobile banking. It occurs when a criminal gains access to an individual’s bank account through one of the three remote banking channels and makes an unauthorised transfer of money from the account. VALUE £150.7m -1% VOLUME 43,906 +38% Total remote banking fraud totalled £150.7 million in 2019, one percent lower than compared to 2018.
Fraud Recovery Statistics in the UK
The number of cases of remote banking fraud increased by 38 percent to 43,906. This reflects the greater number of people now regularly using internet, telephone and mobile banking, and attempts by fraudsters to take advantage of this. In 2019, 81 per cent of the adult population used at least one form of remote banking.
According to UK Finance, a total of £268.8 million of attempted remote banking fraud was stopped by bank security systems during 2019. This is equivalent to £6.41 in every £10 of fraud attempted being prevented. In addition, 17 percent (£25.8 million) of the losses across all remote banking channels were recovered after the incident. In 2021, 15 percent (£30.2 million) of the losses across all remote banking channels were recovered after the incident. In addition, 16 percent (£25.3 million) of the losses across the internet banking channel were recovered after the incident.
Here are some of the actions the finance industry can take to combat fraud:
- Continuously investing in advanced security systems, including sophisticated ways of authenticating customers, such as using biometrics and customer behavior analysis.
- Providing customers with free security software, which many banks offer.
- Investing in the Take Five to Stop Fraud campaign to educate customers on how they can protect themselves from fraud and scams.
- Sharing intelligence and information on this type of fraud so that security systems can be adapted to stop the latest threats.
- Working with law enforcement, the government, the telecommunications industry and others to further improve security and to identify and prosecute the criminals responsible.
6 Recommendations for Companies to Tackle Fraud
Identify all your risks and address on a prioritised basis
The Attorney-General’s Department of Australia defines a fraud risk assessment as a process to help better understand your company’s fraud exposure, the associated risks and the strength of your existing countermeasures. Companies should perform robust risk assessments, gathering internal input from stakeholders across the organisations and geographies, to identify risks and assess mitigating factors.
These assessments should also incorporate external elements. There is a wealth of information available in the public domain, and ignoring it could potentially result in a big mistake. Risks should be assessed at regular intervals – not via a “once-and-done” approach. These are the common areas where fraud risks can emerge:
- Policy and program development and delivery.
- Revenue collection and administering payments to the public.
- Service delivery to the public, including program management.
- Provision of grants and funding arrangements.
- Exercising regulatory authority.
- Corporate financial transactions.
- Procurement and contract management.
- Payroll administration.
- Changes in the activities or functions of an entity.
- Issuing or using identity information.
Use the right technology
When it comes to fighting fraud, there’s no one size-fits-all tool. It can be too easy to spend on the wrong things and too hard to understand the value proposition of the right things. But there is a Goldilocks solution for every organization—including yours. Find it by focusing on matching the real risks you face with proven, effective solutions to them.
Using our investigation and automation expertise, Polonious provides cutting-edge investigation management solutions across industries. Our flexible and adaptable software can work across various industries and find creative solutions for every kind of fraud and investigation.
Often, a mix of technologies works well in a solution, with each playing the part best suited to it, rather than attempting to make one piece of software do everything. For example, Polonious often integrates with analytics/detection tool, where the analytics tool finds potential fraud, which is then loaded into Polonious to manage the investigation.
To get the most from these technologies, here are a few questions you might ask yourself:
- Are they collecting the right data with the right rules and requirements?
- Have they considered the use of machine learning to reduce false positives, or anomaly detection to identify emerging fraud patterns?
- Are they feeding findings from investigations back into their fraud prevention program to make it more robust?
Back-up your technology with the right governance, expertise, and monitoring
Recognise that one tool won’t address all frauds and technology alone won’t keep you protected. Technology often is only as good as the expert resources and regular monitoring dedicated to it. Polonious will continue to meet the demands of the ever-changing laws, regulations and standards as well as ensure a seamless onboarding process. However, you must ensure that this is supported by the people managing the program.
Escalate, triage and respond
The ability to react to a fraud once identified is an important capability and element of an effective fraud program. The ability to quickly mobilise the right combination of people, processes and technology can limit the potential damage. ln some cases, a disruptive fraud may be an opportunity – or a strategic inflection point – to trigger broader organisational transformation for brand protection.
Look for risk markers
Are you seeing an uptick in red flags in your activity monitoring? Are hotline calls up or down? Have enforcement patterns in your industry or geographies changed recently? The Polonious Case Management System has a suite of reporting tools to help you identify trends and prevent future misconduct. This way, you’ll have an opportunity to emerge stronger, clearer, and better prepared than your competitors for the inevitable next incident.
Know how to respond
When your organisation is hit by fraud, you need to know how to respond, and quickly. A consistent approach across global operations is key. For example, conducting investigations, making the right disclosures and taking appropriate disciplinary actions. There’s still more to be done in responding in the right way. Having adequate measures in place can help you respond efficiently during critical moments and even strengthen your organisation’s defences when the next fraud comes along.
There are simple steps that can be taken to help protect customers falling prey to unscrupulous fraudsters. For example, encouraging online platforms to carry warnings, share data on known fraudsters and take down their profiles in order to prevent romance fraud scams. Solicitors and other professionals involved with transfers of customers’ money must ensure their own systems are not vulnerable to being hacked and warn customers that lastminute changes to payment accounts are likely to mean fraud is being attempted.
How Polonious can Help
When organisations have been impacted by fraud, many find they are able to use the incident as a significant driver of positive change across the business. According to a PwC research, of the Australian respondents who had been impacted by fraud in the past two years, some 60% said the experience had helped them to streamline their operations, 50% to embrace new technology, and 43% to ensure incidents were reduced subsequently.
Means by which fraud can be detected include:
- Routine internal audit
- Suspicious activity monitoring
- External Audit
- Document examination
- Corporate security (IT and physical)
- Fraud risk management
As investigation experts ourselves, we know what it takes to help investigators to their jobs best.
Polonious offers case management solutions designed to help with process management, productivity, automation, and analytics. Our investigation software is a trusted solution from investigation teams worldwide and can help you with risk prevention and detection and ultimately help prove your case to recover more from fraud.
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