Fraud trends targeting your business in 2021

Fraud is on the rise, but what are the trends that businesses need to look out for and how can they protect themselves? We talk to experts from the Fraud Advisory Panel to find out more.

Fraudulent activity increased by more than 66% in the second half of 2020, compared to the first half of the year, according to analysis in Barclays’ personal and business banking division, Barclays UK.

This appears to be a trend that is set to continue, says Arun Chauhan, Director at Tenet Law^ and Deputy Chair of the Fraud Advisory Panel.

“There are three main areas for businesses to watch out for,” he says. “The first is around procurement. With cash and liquidity under pressure, there will be a number of businesses desperate to secure more work, and that pressure can lead to a bending of the rules.”

Chauhan explains that this can take many forms, from bribery and coercion of employees to overcharging. “When people are under pressure, they can make decisions they wouldn’t ordinarily make,” he says. “Businesses need to watch their suppliers, particularly if they are one of their key customers, and closely monitor the contract, pricing and performance.”

When people are under pressure, they can make decisions they wouldn’t ordinarily make

Arun Chauhan

Deputy Chair of the Fraud Advisory Panel

An environment rich in opportunity

Cyber-risk will also continue to be an area firms must grapple with. “Cybercriminals are fantastic opportunists and with so many people working from home and facing other distractions, there are real opportunities.” Statistics bear this out, with 86% of businesses experiencing a phishing attack in the last 12 months^. Phishing offers fraudsters a rich data environment to perpetrate their crimes, but says Chauhan, there’s another aspect of cybercrime that’s growing.

“Corporate hi-jacking of retail or large commercial businesses, whereby their identity is mimicked, is a core area of fraudulent activity,” explains Chauhan. “It can be targeted at customers, suppliers or the general public and is incredibly sophisticated. Fraudsters will use a genuine business’ confidential data, their livery and approach to convince others to trade with them.”

Maintaining vigilance on cyber-risk and new threats is important, says Lee Fitzgerald, Director of Fraud Risk Strategy at Barclays International and also a Fraud Advisory Panel Board Member. “One of the richest sources of practical and timely advice is your bank,” she says. “Whenever banks identify a new trend, they issue guidance on it. If businesses adopt even the minimum standards banks recommend, they’ll be going a long way to reduce their risk.”

“Ultimately for cybercrime to occur,” says Chauhan, “there has to be a lapse of human judgement and our people are our human judgement, so we need them to feel confident enough to be able to stop a transaction or a communication.”

The fraud risk within your business

The third fraud trend businesses need to consider is employee risk, whether that’s concerning incumbent employees or new hires. When it comes to the former, Chauhan once again highlights that pressure and the impact that has on human behaviour is a common theme.

“When we’re all fatigued, working from home and juggling responsibilities, we have far less bandwidth to think and react and we’re more likely to let things slip through,” he says. “That protection of having your colleagues physically around you to quickly check something is also missing – and that’s particularly important in high risk areas like accounts payable or procurement.”

Data leakage is also a risk, particularly when working from home may mean sharing workspace or potentially cross use of personal Wi-Fi hotspots.

On the other side, of course, is fraud with intent. “Good people can do bad things and, when they’re mentally exhausted, perhaps facing financial pressure and not operating in an environment where they’re being watched, they may take that as an opportunity to divert expenses or commit fraud,” says Chauhan. “If they’re approached by a third party or supplier, they might just be more susceptible to seizing an opportunity to earn some extra money by divulging confidential data.”

Potential hires can also pose a risk, from lying on their application form to making up references. With businesses inundated with applicants there may be a sense that details will be overlooked. However, failure to rigorously check those details might at best lead a business to employ someone based on fraudulent credentials, or at worst, provide opportunities for fraudsters to infiltrate your organisation.

Finding the right balance

To protect your business from the risk inherent in your workforce, Fitzgerald explains that education is essential. “Creating a framework that’s wrapped around education and frequently refreshing training is important,” she says. “Making sure that framework is robust and reviewing it regularly to ensure it remains fit for purpose is also crucial.”

So much also comes down to culture and leadership, says Chauhan, and now more than ever, recognising the pressure that employees are under to perform and retain their jobs. “If you create a culture where people have unrealistic targets or they’re under constant pressure, it risks leaving employees disenchanted. And when they’re disenchanted, they’re more likely to either be negligent or careless in their job, or worse, dishonest.”

One of the key things, says Chauhan, is to get the balance between trust and policies and procedures right. “Often businesses will set out policies and procedures that don’t reflect what’s happening on the shop floor, so people don’t follow them because they stop them from doing their jobs quickly and efficiently. Essentially, that means that the protection mechanisms fail.

What you need is a balance between risk and compliance and commerciality – an approach that manages the risk but doesn’t prohibit the business is most effective.

To achieve that, engagement across all levels of the business is essential, and Chauhan advocates asking everyone how they would use their role to defraud the business. “The fear is that people might see a great idea and go off and do it,” he says, “but what actually happens is that it identifies the real risks, not the risk register that someone in Compliance built. That can give you a lot more insight into how to protect your business and build a protection mechanism that’s functional for you as a business.”

Where to next

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