Fraud is the last great unreduced business cost, says Jim Gee, Partner and Head of Forensic and Counter Fraud at Crowe Clark Whitehill.
Whereas in other areas of a business, it knows its costs, the common position has been that organisations have either denied that they had any fraud or have planned only to react after a fraud. Losses to fraud usually are found in the range of three to ten per cent, probably around the average of 5.85pc, it’s suggested. Given that the global Gross Domestic Product (GDP) for 2016 was $75.212 trillion or £60.76 trillion, that equates to £3.55 trillion lost to fraud.
Private companies are less financially healthy and stable, the quality of public services is reduced, citizens have less disposable income and charities are deprived of resources needed for charitable purposes. In every sector in every country, fraud has a serious and detrimental impact on the quality of life. So says the audit firm Crowe Clark Whitehill in its Financial Cost of Fraud 2017 report.
Since the start of the global recession in 2008, there has been an increase in average losses from 4.57pc to 6.54pc for the years 2014 to 2016. Why? The report suggests several possible reasons:
– individuals not keeping to collective moral and ethical ‘norms’;
– more complex processes and systems (making it easier to disguise fraud);
– more transactions done by computer and fewer face to face transactions (so that fraudsters can feel more distant from their victims and are less concerned about any response); and
– the pace of change in business (so that controls are struggling to keep up).
Comments
Rich Fenton, SE Manager UK and Ireland at Nimble Storage, said: “To combat this growing threat, the financial services industry is continuing to deploy increasingly complex and expensive behavioural analytics solutions to identify fraudulent activity. However, the speed of big data analysis can only be as quick as the slowest element in an organisation’s IT infrastructure, and growing data sees fast data access becoming a more challenging and complex issue for more IT teams. With such a short window in which to prevent crime once a fraudulent act is attempted, it is crucial that IT teams remediate issues across the stack to ensure that slow data delivery to analytics applications doesn’t prevent the quick analysis needed to stop a transaction going through.”
For the 14-page report in full visit https://www.croweclarkwhitehill.co.uk/wp-content/uploads/sites/2/2017/02/crowe-the-financial-cost-of-fraud-2017.pdf.
And Ryan Wilk, director at NuData Security, said: “These enormous fraud losses, two-thirds greater than the UK’s entire GDP, are astounding. The magnitude of these losses can’t help but have a dampening effect on the economies of the ten countries studied, and be noticeably impactful to businesses who are experiencing up to 6.5pc of losses of expenditure – a 43pc increase in fraud since 2008 per the report. It’s also bad news for consumers, who often bear the brunt of many direct costs (especially in account takeover and new account fraud). It’s absolutely no wonder that consumers are pushing back on companies to improve security, holding them accountable for it, yet still wanting to have a good experience going through the gates.
“Financial fraud offers a lucrative source of income for cybercriminals, with 3.6 million [UK] fraud incidents last year. With such tempting promise of high reward and low prosecution rates, emboldened cybercriminals and have grown in their sophistication, exploiting the human-interest factor by posing as banks or suppliers and then duping consumers into revealing their personal details. These scams have also proved effective in targeting commercial organisations, as senior executives have been tricked into revealing sensitive information which enables access to a company network.
“The increasing volume of attacks globally has also been attributed to more fraudsters willing to commit the crime, more data available on the black market, and more financial institutions and merchants that are vulnerable to attacks. Plus, as more countries fully adopt EMV, fraudsters have switched their tactics online and fraud will continue its migratory path to all available online channels. To detect out of character and potentially fraudulent transactions before they can create a financial nightmare for consumers, we must adopt new authentication methods that they can’t deceive. Solutions based on consumer behaviour and interactional signals are leading the way to provide more safety for consumers, and less fraud in the marketplace.
“To combat these types of attacks, consumers should always report emails to their banking provider. No legitimate organisation will ask for security or banking details, so consumers need to be suspicious of any email that requests this information.”
