5 ways to control COVID-19 fraud risks


Protect your organization in the new normal


Grant Thornton hosted a webinar on COVID-19 fraud prevention on April 23. Out of 615 attendees, 17% have already experienced COVID-19 related fraud schemes. And only 18% already have solid COVID-19 fraud prevention plans in place. What steps should you take now? See our infographic.

The COVID-19 global pandemic is causing massive disruption. Individuals and businesses alike have been through quarantines, stay-at-home orders, and varying plans to reopen to a new COVID-19 normal. Behaviors have changed dramatically. People are ordering and paying for things in new ways. They are using mobile apps and online accounts for activities they used to do in person. And for those who can, much of the country is working remotely from home.

These changes are stressing technology infrastructure at many organizations. Continuity of business plans have been activated and it’s all-hands-on-deck as companies struggle to keep their businesses running. Resources are stretched, defenses are down, and people are operating in unfamiliar territory. Combine that with the sudden availability of trillions of federal dollars, and scammers are pouncing on this opportunity. Already, there are examples of fake coronavirus-tracking apps that are merely vehicles for malware and ransomware. Hackers are breaking into remote web conference meetings. You can expect an increase in new account fraud, account takeover fraud, man-in-the-middle attacks and others.


In times of crisis, force is exerted on all three sides of the fraud triangle. The confusion created by changes in behavior, along with a spike in government payments presents a window of opportunity. Pandemic-related payouts include unemployment claims, stimulus payments, business loans, and enhancements to other welfare programs. With the economy faltering, companies and individuals may face severe financial pressures. Considering the sometimes-life-or-death consequences of a pandemic, there is plenty of rationalization for illegal behavior.

And fraudsters are using increasingly sophisticated tools. We live in the age of the breach. Because individuals and businesses suffer a constant stream of attacks, huge volumes of personal identifiable information about a company’s constituents, partners, customers and employees are available for sale on the dark web, often packaged into fraud programs. For example, in March a dark web seller was already offering 10,000 stolen loan profiles targeting the huge SBA loan program included in the CARES Act.




Protecting your company in the new normal


Many organizations have deployed analytic models to help detect fraud. Long used in the payments industry to detect suspicious transactions, this same technology has been deployed to spot suspicious insurance claims, online logins, applications, and more. While supervised predictive models are very powerful, they have a fatal flaw in the current environment. They are based on the fundamental principle that past behavior is a predictor of future behavior. When there is a major event like a pandemic that disrupts normal behavior, that principle is no longer valid. The result? Models begin producing a high volume of false positive and false negative results.

Under normal business circumstances there is strong pressure to strike a balance between providing a streamlined customer experience and detecting fraud. In a crisis scenario, there is even greater pressure to reduce friction and ensure resources flow the people who need them most. That needs to be the priority. Inevitably, this results in compromised fraud defenses. Many fraud protections – especially those that introduce friction or time delays – may be sidelined during a pandemic response. But allowing fraud to occur unchecked will divert resources from the needy to the greedy. The following five steps will help stem fraud in the current pandemic environment.




Changing your fraud detection program


Step 1. Designate an anti-fraud champion in your organization. Your champion should have accountability for all pandemic-related anti-fraud programs. This person may already exist in your organization, but this is not a “business as usual” assignment. This person needs to be adaptable and inclined toward rapid execution.

Step 2. Update core systems. There are likely to be many changes in business process to rapidly respond to changing government programs, regulations, stimulus packages, economic factors and executive business decisions. Current systems may not be well suited to capturing adequate data for new procedures. Plan to adapt current systems or improvise new ones to suit the new process.

Step 3. Ideate fraud schemes. In these uncertain times, it is even more important to be proactive in identifying new threats. Establish a team to evaluate these emerging fraud schemes and gather intelligence from peers, regulators, and partners. Collaborate with cybersecurity teams to leverage existing threat intelligence sources.

Step 4. Leverage unsupervised detection techniques. While supervised modeling techniques may not provide the greatest accuracy when behaviors change dramatically, unsupervised methods can provide greater lift. Anomaly detection, network analytics, and expert rule systems can all add immediate value.

Step 5. Iterate and adapt. Fraud detection is not a “set-and-forget” process. Expect the threat landscape to evolve over time. Explore the use of robotic process automation, alert hibernation and other methods to help deal with the increased volume of alerts that fraud teams are likely to encounter.

All indications are that fraud will increase dramatically in the coming months. With these steps, organizations can be better prepared to address this new wave of fraudulent activity, protect the assets of their organization, and ensure that resources are available for legitimate uses – especially for those who need them most.





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