No Place Like Home: Heightened risks for companies due to Covid-19 and remote

The Current Climate

For its Global Economic Crime and Fraud Survey 2020¹, first published in March 2020, PwC surveyed 5,000 companies across 99 territories with striking results. 47% of respondents revealed that they had reported fraud in the previous 24 months, the highest figure in the history of the survey. The picture for UK companies is comparatively worse with 56% of respondents having reported fraud in the same period. Bear in mind that this was all before the pandemic hit.

The sharp increase in remote working triggered by COVID-19 has been a catalyst for record high cases of fraud and economic crime. Action Fraud reported a 400% increase in the number of fraud cases it received in March 2020 alone, as compared to February 2020. Over the course of the pandemic to date, Action Fraud estimates that £2.1 billion has been lost to fraudsters based on more than 350,000 cases of fraud that have been reported to it. These cases include reports of internal financial reporting fraud, market manipulation and insider trading, as well as fraud targeting individuals. We predicted that the pandemic would be the perfect storm for an increase in fraudulent activity. Given it is estimated that only 20% of frauds are ever reported,² we expect that Action Fraud’s estimate is, sadly, only the tip of the iceberg.

Indeed, a report by UK Finance³ published on 25 March 2021 unfortunately confirmed our prediction to be correct: payment industry fraud alone amounted to £2.83 billion in 2020. Whilst there was a decrease in the volume of certain types of fraud, such as invoice and mandate scams, there were some significant increases in the volume of others as compared to 2019. CEO Fraud (where the scammer manages to impersonate the CEO or other high ranking official of a victim’s organisation to convince them to make an urgent payment to the scammer’s account) increased by 24%, unauthorised remote banking fraud increased by 68% (including an increase in internet banking fraud of 117%), and authorised push payment fraud increased by 22%. UK Finance is one supporter of the Personal Investment Management & Financial Advice Association’s call upon the Government⁴ to include financial harm in the forthcoming Online Harms Bill.⁵ We wait to see what will come of this but note that the Government’s 2021 Budget only mentions tackling fraud within COVID-19 support packages.

The Royal United Services Institute for Defence and Security Studies (“RUSI”) considers that the “prevailing political narrative fails to convey the full impact of fraud on the UK” and that “continued under-resourcing of the fraud response means that political rhetoric fails to match operational reality”.⁶ Given its pervasiveness and ability to undermine confidence in the rule of law, RUSI categorises fraud as an issue of national security. It has called upon the Government to facilitate improved intelligence architecture, provide a better resourced and coordinated policing response, and increase coordination with the private sector. Although the Government has not addressed the issue as of yet, regulators are certainly taking a more robust approach.

On 30 March 2021, the Crown Prosecution Service announced a new strategy to combat economic crime⁷, having used figures from UK Finance and particularly commenting upon the fact that 86% of fraud reported during the pandemic has been cyber-enabled; in other words, remote working exacerbates the issue. Our team has written separately about the CPS’ strategy.

External Risks of Fraud

Typical techniques used to defraud victims, such as authorised push payment scams and hacking, remain commonplace and are being used against financial institutions and individuals alike.

In the case of Philipp v Barclays⁸, Mrs Philipp and her husband, Dr Philipp, were approached by a fraudster who told them that he worked for the FCA and the NCA. He persuaded them to transfer Dr Philipp’s savings into “safe…