As organisations grapple with increasingly sophisticated fraud schemes, International Fraud Awareness Week – which takes place this week (18-22 November) serves as a critical reminder of the significant financial and reputational risks posed by fraud.
With global losses estimated at 5% of annual sales, the need for heightened vigilance and proactive measures is more urgent than ever.
By raising awareness and providing educational resources, companies can empower their workforce to recognise and prevent fraud, safeguarding their bottom line and protecting their brand.
Responsible AI adoption is key
AI is revolutionising industries, including insurance, by making them more efficient and productive. However, this powerful technology is like a double-edged sword, on one end it enables the swift detection of fraudulent claims but it also gives cybercriminals sophisticated tools to use for elaborate scams.
With that being said, AI can be used for good. It can quickly analyse patterns and anomalies which will help insurers identify fraudulent claims quickly and it can make policy underwriting more efficient.
With a key focus on AI and insurance fraud, this year’s Fraud Week shows how the challenge lies in harnessing AI’s potential for good while mitigating its risks.
“With robust cybersecurity systems in place and employees who are informed about the latest AI developments, situations including deep fake scams and insurance fraud can be avoided” says Zaakir Mohamed, director and head of corporate investigations and forensics at CMS South Africa
“Going forward, responsible AI adoption, and keeping AI as an asset, not a liability, is key in fighting fraud.”
Cyber insurance should be prioritised
Affecting individuals, businesses, and economies, the global cost of cybercrime is projected to increase to nearly $24-trillion by 2027, up from $8,5-trillion in 2022.
No longer requiring a niche skill set, easy-to-use interfaces to large-scale AI models have already enabled an explosion in falsified information and so-called ‘synthetic’ content, from sophisticated voice cloning to counterfeit websites.
According to the WEF Global Risks Report 2024, in collaboration with Marsh McLennan and Zurich Insurance, false information could not only be used as a source of societal disruption but also of control in pursuit of political agendas. Although misinformation and disinformation have long histories, the erosion of political checks and balances and growth in tools that spread and control information could amplify the efficacy of domestic disinformation over the next two years.
That lack of insurance can have significant impacts in the long term. Even when SMEs survive major cyberattacks, their ability to innovate and take risks might suffer as a result. And taking risks is vital to growing businesses and the economy. This is according to Spiros Fatouros, CEO of Marsh McLennan, Africa and South Africa.
“When it comes to preventing financial losses, businesses should have the option of covering a range of risks, including financial losses, business interruption costs, recovery expenses, and other expenses like regulatory investigation coverage, crisis management expenses and third-party legal liability coverage,” says Fatouros.
“Finding an insurer that offers all of those things and has a strong track record of paying out valid claims will help ensure that businesses of all sizes are properly protected in the event of a cyberattack. Given the prevalence of cyberattacks in South Africa and around the globe, that should be a priority for any business leader.”
Advancements in financial technology
The need for speed in payments has led to significant advancements in financial technology. With the proliferation of real-time payments, fintech companies are racing to develop and refine products that allow for both fast and secure payments – which can ultimately boost efficiency and improve cash flow.
However, this has brought with it an increased need for advanced security measures, as real-time payments also bring increased risk. Because payments are settled instantly, there is no room left to correct any errors that may occur. This can present a variety of challenges
”As we embrace the speed and convenience of instant payments, we must also prioritise robust security measures to protect our customers and their assets. This requires a collaborative approach towards educating and enabling ground staff, managers and those in the C-suite around advanced measures and procedures,” says Moses Marimira, director: compliance and group MLRO at Onafriq.