The financial cost of fraud 2021

Since the advent of COVID-19 we have seen a surge in fraud. This has included both COVID-19 specific fraud and general economic crisis-driven fraud.

Examples of COVID-19 specific fraud

• Fraudsters have pretended to be undertaking research for the World Health Organisation (WHO). They claim to provide the victim with a list of active infections in their area but to access this information the victim needs to either click on a link which redirects them to a credential-stealing web page.
• Emails asking for donations to buy ‘medical preparations and supplies’ for the NHS to cope with coronavirus.
• Other scams purporting to be official messages from the government include texts telling people they have been fined £250 for leaving their home more than once during lockdown.
• Fraudsters have been providing articles about the virus outbreak with a link to a fake company website where victims are encouraged to click to subscribe to a daily newsletter for further updates.
• Fraudsters have been sending investment scheme and trading advice encouraging people to take advantage of the coronavirus downturn.
• Fraudsters have purported to be from HMRC offering a tax refund and directing victims to a fake website to harvest their personal and financial details. The emails often display the HMRC logo making it look reasonably genuine and convincing.

Examples of economic crisis driven fraud

• Employees who have either been made redundant already, or think that they will be, stealing client data and intellectual property to ingratiate themselves with prospective future employers.
• Fraudulent invoices submitted by under pressure suppliers for goods and services which either haven’t ever been ordered or have never been delivered.
• Senior managers, unbeknown to their employers under financial pressure, using their authority to manipulate accounts and misdirect money.
• Mandate fraud, where bank account details are changed to misdirect money.

The risks to organisations are both internal and external. Possible economic pressures may lead people to radically re-evaluate loyalties and to rationalise behaviour which, in normal times, they would not consider appropriate. Previous recessions have seen a new generation of fraudsters created where the ‘normal’ dishonest minority is enlarged by those determined to protect their income and assets no matter what. This is particularly the case because of some over-extending with a post-Brexit surge of expenditure, house buying and investment, all of which came to an abrupt halt with the advent of COVID-19.

The impact of this has been seen in the latest Office for National Statistics crime statistics* which have shown a 19.8% increase in the incidence of fraud in England and Wales.

It is likely that this will impact on the cost of fraud and error, and we will see what this is in the next Financial Cost of Fraud report in 2022.

*ONS CSEW statistics for the 12 months up to the end of March 2020 versus the same statistics for the 12 months up to the end of September 2020.

Download the full Financial Cost of Fraud report