Recession could lead to fraud surge in 2012

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Internal employee fraud highlighted as potential area of increase.

Research led by UKFraud.co.uk of more than 50 UK-based and European fraud consultants has found that fraud is expected to surge in 2012, with insurers, retailers and telecoms companies most likely to be affected.

The research found that, of the 50 fraud specialists polled, 80% felt that fraud is likely to go up. The most common fraud activities are expected to be cyber crime, internal fraud, supply chain and procurement fraud.

The only area where fraud is expected to remain stable or to fall is the credit card sector where aggressive anti-fraud measures have forced fraud levels to fall.

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The current economic state in the UK is being touted as the cause of a rise in fraud, with increasing unemployment looming.

One growing area of concern is expected to be internal fraud as employees face potential redundancy or staff find their careers are put on hold by budget cuts.

In the UK the state’s anti-fraud organisation the National Fraud Authority (NFA) is also under pressure, with their own current estimate of UK fraud running at £38bn, more than double the £13bn projection in 2008.

A participant in UKFraud’s research, Malcolm Gardner, managing director of Visionary Network said: “Quite simply the unusual combination of circumstances has created the ideal environment for a perfect storm for global fraud growth. 2012 could well be remembered as the year of fraud and corruption”.

Bill Trueman, chief executive of UKFraud, did suggest that there are options for the more adaptive organisations to avoid the impact of fraud, something that may be of importance for jewellery brands and retailers.

“At the moment the international and domestic picture of increasing fraud most closely resembles a tidal surge.

“It is likely that despite all the organisation and effort to combat fraud, that the currently unprecedented frequency and scale will brand 2012 as the year when fraud risk was at its most pernicious. Rather than waiting for macro-economic or pan-European policy to take effect, individual and organisations are best to prepare and strengthen their own individual defences quickly and increasingly more comprehensively.”

UKFraud has outlined five useful steps to counteract potential fraud.

1. Ensure that those working on your IT systems understand the technical risks and they know how to protect your business from attacks, theft of customer information and infiltration. Customer details and payment details are the most ‘at risk’ data; and that access security is the most important to the police.

2. Remember though that with the best systems in the world, one of the weakest points of vulnerability is always the people using the systems, as they can easily be mis-led or conned. Ensure that customers have strong advice and warnings of the dangers. Also make sure that staff cannot access sensitive areas of your systems without proper controls and whatever they do is stored and available for audit.

3. Look at your processes for weaknesses. These include: writing personal or banking details on paper unnecessarily, access to unnecessary customer data, who can access what and why people may need to access such details. Ensure that people have what they need to do their jobs, but no more.

4. Make sure that your anti-fraud efforts are not just ‘after the event’ investigation-led. Ensure that you set deterrents and prevention. You should consider deploying early detection processes, systems, solutions and technology and that when you see a problem you take action to fix it properly and permanently.

5. And finally, if you employ a fraud specialist, make sure that they have the ability to take action and change the business for the better.

 

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