As the world economy begins to awaken from an eighteen-month hibernation due to the pandemic, organizations are assessing how to adapt post-pandemic realities. New business operations, changing customer habits, and supply disruptions are three remnants of COVID-19 that can’t be helped by a vaccine. According to a new study, they will also likely have to deal with the rising potential for widespread fraud.
The Association of Certified Fraud Examiners (ACFE), with the help of Grant Thornton, surveyed anti-fraud professionals across the globe to better understand the current and expected effects of the pandemic on the prevalence of corporate fraud. Their findings were unmistakable—fraud is expected to boom post-pandemic. Of the organizations surveyed, 51 percent have already uncovered more fraud since the onset of the pandemic, and 71 percent reportedly expect the level of fraud impacting organizations to increase over the next year.
Increasing Anti-Fraud Budgets
Companies are already reacting to the specter of increased fraud and abuse at their organizations. According to the study, anti-fraud technology received the largest budget increase for fiscal year 2021, with 38 percent of anti-fraud programs upgrading their technology. In addition, more than 80 percent of organizations have already implemented one or more changes to their anti-fraud programs in response to the pandemic.
The ACFE study also found that more organizations are investing in their fraud-fighting capabilities. Very few anticipate their program will operate with a lower anti-fraud budget in 2022 than they will in 2021, with 43 percent reporting they expect their budget to significantly increase and 48 percent reporting they expect their budget to remain the same. This is a strong indication that increased levels of fraud are not just an immediate consequence of the pandemic, but could remain for a while.
All Types of Fraud are Up
Professionals predict that fraud will increase across the board. More than 50 percent of anti-fraud professionals expect to experience an increase in every category except financial statement fraud. Of the categories expected to increase, cyberfraud and social engineering are anticipated to undergo the most dramatic spikes. The three categories thought to increase the least belong to employee embezzlement, bribery and corruption, and financial statement fraud.
The two risk factors that have had the greatest effect on instances of fraud so far are shifts in business operations, such as the shift to remote work, and changing consumer behavior, such as the increase in virtual retail and online transactions. More than 66 percent of respondents indicated that both of these factors have had a significant or moderate influence on their organization’s fraud risk landscape and fraud risk management program. Notably, the respondents also believe that these will continue to be the greatest risk factors going forward for the next 12 months.
Roadblocks and Lessons
Some of the many obstacles that the pandemic created for anti-fraud programs are changes to the investigative process, including remote interviews, limited travel, restricted access, and changes to the control and operating environment through staff changes and remote work. Sixty percent of organizations reported changes to the investigative process being the biggest challenge, with 59 percent of organizations noting changes to the control and operating environment as hurdles. These challenges are not expected to disappear when the pandemic subsides.
Organizations seem to have found a silver lining to these challenges, however. More than half of the respondents believe that enhanced fraud risk awareness and increased collaboration across the organization are necessary to be more effective post-pandemic, the ACFE found. Only three areas—fraud risk awareness by third parties, third-and-fourth-party risk management and due diligence, and a shift in focus from lagging to leading indicators of risk—did not receive the same type of support and attention, with less than one third of respondents identifying them as necessary areas of improvement.
While 46 percent of respondents were from the United States, the ACFE polled organizations from every continent and industry. Close to half of the industries polled were financial services and government and public administration, making up 26 percent and 21 percent respectively. Of the surveyed, 58 percent worked at organizations with more than 1,000 employees. The remaining 42 percent were employed by smaller organizations.
With many aspects of remote work here to stay, improving cybersecurity and ensuring the integrity of online practices, with an eye toward mitigating fraud risks, should be near the top of the list of internal audit’s post-pandemic plans. 
Michael McGee is assistant editor at Internal Audit 360°