Fraud is no antiquated concept. Its origins date back far beyond the invention of money and digital currencies.
By Trevor Hills, PwC South Africa’s forensics leader
However, at times, fraud and corruption can be seen as a topic society would prefer not to deal with. It is a fact that most entities experience fraud at some point. Fraud and corruption can severely affect and delegitimise the trust that societies have in a business, and thus invalidate its licence to operate.
Today, as the world increasingly transitions more online — and is one in which we are more interconnected and tech-savvy — the opportunities for and risks of fraud have increased 10-fold. This is largely due to a myriad of sectors facing disruption, which has become the new normal.
For decades, unscrupulous individuals have operated as professional fraudsters and created lucrative careers from purposely deceiving ordinary people to unlawfully or unfairly gain from them. While many people may think fraud is mainly financial, its scope can extend to identity theft, healthcare fraud and flouting crucial procurement processes.
This was seen when the Covid-19 crisis hit South Africa’s shores. Procurement protocols were circumvented to expedite the sourcing of critical equipment, and in so doing, the opportunities for fraud and corruption arose in an economy that was under immense strain as a result of lockdown restrictions.
Today we find ourselves moving into a post-pandemic phase. However, it was not long after this process began that many countries were impacted by Russia’s invasion of Ukraine. Supply chains were disrupted, an increase in the illicit flows of funds and goods found new “channels” to market as a result of the trade bans that were imposed and the trade bans and restrictions imposed on global logistics. Again, the opportunity for fraud and corruption increased and the impact thereof on the global economy is yet to be determined.
Despite the thriving landscape in which fraudsters operate, we are beginning to see both the public and private sectors in South Africa take positive steps to work towards eradicating fraud and corruption. By employing principles in the form of a structured plan to proactively manage its fraud risk exposures, an organisation can be seen as more trustworthy as it has steps to shield itself, and its employee and client data, against the impact of fraud — thus protecting shareholder value.
Some of these steps include basic actions around setting up a fraud risk management programme, identifying and assessing potential red flags that an entity needs to mitigate on an ongoing basis, having preventative and detection techniques, and lastly, executing a structured approach in the form of a fraud response plan when an organisation has been hit with acts of fraud.
With constant, rapid advancements in technology, fraud, especially online, is becoming more sophisticated and therefore tougher for authorities to track and crack down on. The twenty-first century has seen some very elaborate cases of fraud, bribery and corruption being carried out, which were not only conducted at the hands of individuals, but involved multinational corporations too.
Data, we have seen, is a prime target for fraudsters. As such, many organisations are spending time and money implementing policies and technologies to ensure that customer data is protected. At the same time, it is critical to ensure that the right data is available in order to quickly respond when an incident of fraud occurs. We have seen that with the use of AI technologies for example, investigative cases are being executed more efficiently and effectively.
In an increasingly ever-connected world, fraud is expected to grow. However, people and organisations can take several measures to protect themselves. More organisations are recognising the importance of implementing predictive and preventative measures to protect their company and people, however individuals also need to have measures in place to minimise their risk of being defrauded.
When fighting against an unknown predator, either external or colluding with internal perpetrators, barriers to swift response need to be addressed. PwC’s Global Economic Crime and Fraud Survey 2022 highlighted the lack of a dedicated programme to respond to fraud amongst the respondents. Some of the barriers are organisational, but others include an entity not having the workforce, economic power, and the diversity of resources with skills and technical capabilities to respond to the fraud.
No one single framework will ever work in isolation; organisations will thus have to break down the barriers, work in collaboration with various stakeholders and have defined roles to win in the fight against fraud and corruption.
Combatting fraud and corruption starts with the adoption of a “zero tolerance” approach by society as a whole. Governments, business and citizens play an equal and collaborative role in eradicating fraud and corruption, failing which we will continue to see the demise of economies, and by extension, the sustainability of our planet. It is imperative that we all ask ourselves what role we are playing in building a sustainable, fraud-free world.