Three simple tips to avoid fraud and errors in times of crisis

Gareth Hall, Anne-Marie Ottaway and Barry Vitou of Greenberg Traurig discuss ways that businesses can respond to the renewed threat of fraud in the light of the coronavirus crisis.

With businesses ordered to close, workers advised to stay at home and financial markets at their most volatile, companies and their leadership are under huge pressure to ensure that the coronavirus crisis does not become a business crisis.

Businesses have diverted much of their energy to enabling those working for them to work from the relative isolation of their own homes, working tirelessly for customers while preserving cash. In all of this it is important not to overlook the maintenance of a robust control environment.

External threats, internal risks – two sides of the same coin

Stories are already emerging of alleged fraud. In the US the Department of Justice has filed its first enforcement action for Covid-19 pandemic related fraud. Attorney general William Barr has directed all US attorneys in every district in the United States to focus on the investigation and prosecution of coronavirus-related fraud schemes and has urged the public to report accusations of Covid-19 related fraud by contacting the National Center for Disaster Fraud (NCDF) hotline.

In the UK, the National Crime Agency has warned of the increased risk of scams and the Financial Conduct Authority has provided scams guidance listing examples that people should look out for including:

  • Loan fee/advance fee fraud. Targeting those already under financial pressure, namely being requested to hand over an upfront fee when applying for a loan or credit that is never obtained.
  • ‘Good cause’ scams. This is where investment is sought for good causes such as the production of sanitiser, manufacture of personal protection equipment (PPE) or new drugs to treat coronavirus – with scammers using the promise of high returns to entice consumers.
  • Investment scams. Using the uncertainty around stockmarkets, scammers may advise you to invest or transfer existing investments into non-standard investments.
  • Clone firms. Some scammers will claim to represent authorised firms to appear genuine. In particular, be aware of life insurance firms that may be cloned.
  • Insurance scams. Scammers may contact you claiming to be from a claims management company (CMC), insurance company saying they can help you recuperate losses and ask you to send them some money or your bank details.
  • Cold calls. Cold calls, emails, texts or WhatsApp messages stating that your bank is in trouble due to the coronavirus crisis, and pushing you to transfer your money to a new bank with alternative banking details.

Business compliance programs must be robust enough to avoid falling prey to these external scams at the same time ensuring compliance programs are effective in a home working/self isolating environment. On occasion this will not be the case. For example, a ‘work around’ to deal with the requirement for two original signatures to make a bank transfer could potentially be exploited to facilitate a phishing cybercrime.

Our top three tips for business

Risk assess and update policies as required in the ‘new normal’ of working remotely

Not all company policies and procedures will stand the test of remote working. Risk assess your business in the new working environment and update policies and procedures in key areas to ensure internal scrutiny, formal auditing and authorisation can still take place effectively.

Maintain monitoring and supervision

Working from distance creates challenges, risks as well as opportunities. Technology can assist to ensure that monitoring and supervision protocols which may be geared to office based employees and physical proximity are updated to take into account remote working.

Communication, communication, communication

If in a real estate environment it’s all about location, location, location in a virtual world it’s all about communication.

Ensure employees are reminded of existing controls and updated on changes flowing from the new remote working environment.

Likewise it is critical to make sure that remote working and self isolating workers do not feel cut off or inhibited from asking questions or liaising with colleagues. Teamwork is more important than ever.

Encourage team meetings online and by phone, maintain open lines of communication and encourage questions.

Profound changes

An indirect but profound consequence of the Coronavirus pandemic is the quantum shift in the way we all work almost overnight. Businesses should make sure that compliance programs and systems and controls cater for this new working environment. Businesses should start with a risk assessment and update their policies, continue to monitor and supervise in an effective way and last, but most certainly not least, communicate, communicate, communicate.