Covid-19 - an opportunity for fraudsters?

Blog by Kieran Donnelly CB, Comptroller & Auditor General

After a year of crisis and change across the globe, the impact and challenges resulting from COVID-19 remain as serious as ever. Sadly, there is one group of people who have relished these circumstances as a golden opportunity – fraudsters. 

Huge volumes of emergency grant payments administered at speed, dramatic changes in demand for certain types of products, a massive increase in remote working, a surge in online shopping during lockdowns – all of these provide significant opportunities for fraudsters, and pose serious threats for both organisations and individuals.  There is already clear evidence that fraudsters have been quick to seize upon such opportunities, with regular stories in the media about organisations and individuals suffering financial loss as a result

The identification and prevention of fraud in the public sector has, of course, always been a high priority for my office, be it through our auditing of financial statements, or through our involvement in the National Fraud Initiative. While we continue to find new and innovative techniques and systems to help us in this work, we also remain alert to new and ever-changing fraud challenges which may emerge.

Our Covid-19 Fraud Risk Guide and Procurement Fraud Risk Guide , produced to raise awareness, each provide a quick point of reference for NI public sector organisations, highlighting the key risks and the controls that can mitigate those risks.

Some key fraud risks for organisations are:

• weakened governance and internal control arrangements due to, for example, remote working, redeployment of staff into unfamiliar areas, or the normal channels for staff and third parties to raise concerns about possible fraud not being available;
• fraudulent applications for support from the range of emergency packages available for businesses and employees;
• pressure on the supply chain and the risk of fraudsters taking advantage, for example, by providing inferior or even dangerous products;     
• an increased risk of cyber-crime and data breaches, due to the level of remote working and the increase in online traffic of all kinds; and
• an increased risk of internal fraud, such as false or inflated claims for overtime, due to extra financial pressures on staff.  

The pressures of 2020 have led to innovation in the way business is done, but they have also led to innovation by fraudsters.   In the “new normal” of 2021 and beyond, real thought needs to be given to the opportunities for more joined-up working, for example through greater data sharing, to combat fraud. 

Prevention is better than cure, and having effective controls in place is essential.  But when fraud inevitably occurs, the solution doesn’t lie just with the police and criminal justice system.  There needs to be an effective response from organisations and perhaps a more flexible approach to sanctions, such as exploring civil and disciplinary options.

I would encourage organisations to look at the guides, and review their systems and controls to ensure they have done everything they can in the current circumstances to minimise their risks. 

Any actual, suspected or attempted frauds in central government should be reported to me (Kieran.donnelly@niauditoffice.gov.uk ); any actual, suspected or attempted frauds in local government should be reported to the Local Government Auditor (pamela.mccreedy@niauditoffice.gov.uk ).

Kieran Donnelly

Comptroller and Auditor General