The destabilizing events of recent years have significantly changed the global socio-economic paradigm, which has created a need for innovation and new approaches to business strategies, human capital and operations. At the same time, technologies and tools based on artificial intelligence (AI) are rapidly developing and the pace of adoption among both companies and private users is increasing, and while innovation and adaptability were important in this difficult time marked by rapid change. , they have also created new operational vulnerabilities for companies, as well as the evolution of fraud techniques.

According to the Association of Certified Fraud Examiners (ACFE) 2022 Report to the Nations on the impact of the pandemic on professional fraudpersonnel and operations changes, reconfiguration of internal control procedures, telecommuting, adjustment of strategic priorities, technological challenges, and modification of anti-fraud programs were identified as the main intermediaries of fraudulent schemes52% of respondents from companies affected by fraud said that at least one of these factors was present in their case. The same Deloitte Insurance Fraud Study 2023 lists telecommuting, increased digitalization and weakening of internal controls as the main reasons for the rise in insurance fraud. Furthermore, the latest UK Office for National Statistics fraud report states that fraud and cybercrime have increased significantly from 2020 to 2022, with the proportion of cyber fraud incidents rising from 53% to 61% over the same time period, possibly due to changes in behavior caused by the pandemic.

Disruption or even disruption of supply chains due to international sanctions and resource shortages, in the context of geopolitical tensions and the war in Ukraine, add additional pressure to an already turbulent environment.

Given this complex context and considering the “fraud triangle” developed by Dr. Donald Cressey, an American sociologist and criminologist, according to which a person is more likely to commit fraud if he is under financial pressure, if he sees an opportunity to commit the act, respectively, if it determines the motivation through which the act itself becomes acceptable, the analysis opportunities seen by fraudsters and anti-fraud solutions available.

Opportunities seen by fraudsters

Although the classic profile of professional fraud, which includes corruption, misappropriation of assets, and financial reporting fraud, has undergone some changes over the past decade, with fraud being detected more quickly and causing approximately 16% fewer losses, according to the aforementioned ACFE study, the risks all still exist because fraudsters are constantly looking for and exploiting new opportunities to commit them.

Growth you creates additional anti-fraud challenges for both companies and professionals, as attackers may be tempted to use such tools for enhancement and enhancement, e.g. phishing attempts through adaptive learning, to create forged documents with image processing solutions and even bypassing video checks with technology deepfake. According to a recent survey by identity verification solutions company Regula, 37% of organizations have already experienced voice fraud. deepfakeand 29% became victims of such videos.

Also, given the economic difficulties they face, some companies may be tempted reduce or not apply existing internal controls, simplify contracting procedures and not burden your suppliers or customers with various checks. As available budgets shrink, companies and their representatives may also unwittingly come into contact with with gray or even black market sellers in its efforts to reduce its costs for certain goods or services, thereby increasing the risks of entering into contracts with fictitious or illegal suppliers and thus exposing itself to situations where the purchased goods or services do not meet the requirements or are not delivered.

Decision

Companies must consider both proactive and reactive solutions.

Proactive solutions, focusing on fraud prevention and deterrence, ranges from providing the organization with appropriate strategic communications on compliance and ethics to implementing a robust internal control environment, a compliance function to monitor fraud, conducting risk assessments and training staff to raise awareness of fraud risks. All the methods mentioned above must be adapted to the operational needs and realities of each company, as there is no universal solution ready at any time for implementation that meets the highest performance indicators, standards of ethics and integrity.

However, in the event of a crisis, companies must resort to reactive solutionssuch as performance forensic medical researchfor detecting and stopping schemes fraud In such situations, companies should turn to professionals in the field so that both the fraud and the reasons behind it are fully detected and supply chain compliance is ensured.

Forensic professionals use various IT tools, especially for collecting, processing, analyzing and visualizing data and for execution of eDiscovery procedures. In short, eDiscovery is the process by which forensic experts collect data structured and unstructured data from various digital sources, for further analysis and safe storage. A wide range of specialized eDiscovery tools are now available to collect, process and review data in an appropriate manner. Given the large amounts of electronic data in use today (from e-mail or chat messages to databases cloud), eDiscovery has become a necessity, on the one hand, for conducting judicial investigations themselves, and on the other hand, for comprehensive review and testing of internal control proceduresand the organization’s compliance and resilience to fraud risks.

Fraud techniques are constantly evolving, and fraud itself will never be eliminated. Consequently, companies must constantly improve their organizational awareness as well as their internal control environment so that they can prevent the risks that even the newest fraud schemes can pose. On the other hand, in crisis situations, it is necessary for the organization to have management strategy crises, including a well-structured response protocol and action plans configured to handle typical aspects of each situation.

Material for the opinions of Mykhailo Buceru, Director, and Emil-Ioan Borza-Dediu, Senior Associate, Financial Advisory, Forensic Services, Deloitte Romania