By Cassandra Michie, Partner - Fraud Risk and Controls, PwC Australia
The Association of Certified Fraud Examiners (ACFE) recently conducted a global survey, Fraud in the wake of COVID-19, which found that as of November 2020, 79% of respondents say they have seen an increase in the overall level of fraud as a result of the pandemic, which was expected to grow during 2021 to 90%. PwC’s biennial Global Economic Crime and Fraud Survey 2020 (GECS) shows that 35% of Australian entities report having experienced fraud in the previous 24 months (compared to 47% globally), a measure which we also expect to rise over the next two years.
The ACFE global survey also found that while COVID-19 has had a major impact on the rate of fraud, due in part to disrupted controls and supply chains, the response to fraud has also become more difficult. Investigation efforts are now harder with physical restrictions placed on staff, an inability to travel, difficulties conducting remote interviews and a lack of access to evidence.
Despite the challenges there appears to be a divergence between the benefit of investment in controlling fraud and the appetite to invest in combating fraud.
The cost of fraud in Australia is in the billions ranging from identity fraud, fraud against the government, cyber fraud, misappropriation, misstatement and online fraud. PwC’s Global Economic Crime Survey estimated that 35% of Australian organisations experienced fraud in the last 12 months.
PwC’s global 2020 GECS found that companies who invested in fraud prevention incurred lower costs when a fraud incident was experienced including:
The below ‘fraud triangle’ model highlights three factors that are typically present when fraud occurs, which are: a rationalisation of the behaviour, an internal or external pressure to commit fraud, and the opportunity to execute it. The pandemic affected all three of these elements which has increased fraud risks for Australian organisations for the foreseeable future.
Rationale: The current global pandemic may lead employees to rationalise fraudulent behaviours that would have been inhibited previously, with altered risks such as:
Pressure/Incentive: With the economic impact of the pandemic and threats of lockdowns from future outbreaks, pressures to commit fraud aren’t going anywhere, including:
Opportunity: With so much disruption to the ways of working, such as broken supply chains, altered operating models and limited access to resources, the opportunity for fraud to occur has increased dramatically in the current environment, with increased risks in areas such as:
During the COVID-19 pandemic businesses and individuals are experiencing a range of threats. Below are the common threats that continue to be experienced.
Internal threats include:
Purchasing and payables:
Payroll and employee expenses:
Sales and receivables:
The external threats to businesses and the general public include:
For over 2 decades the Australian Standard 8001 Fraud and Corruption Control (AS 8001) has been used to benchmark and is PwC’s primary source of governance when advising Australian organisations on how to manage the risks of fraud and corruption. On 11 June 2021 the AS 8001-2021 was refreshed with new guidance to help clients proactively manage fraud and corruption. The 2021 version of the AS 8001 broadly follows a similar structure as the former (2008) version, but now includes an:
For further information on how these changes and issues may affect your business, contact Cassandra Michie.
Partner, PwC Australia
Tel: +61 2 8266 2774