Fraudulent activity spirals due to digitisation and remote working

19 November 2021 5 min. read
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The number of fraud cases in Middle East businesses has risen significantly during the Covid-19 pandemic, according to Deloitte’s latest Fraud Survey, with rapid digitisation and focus turned away from risk management to business continuity regarded as the main reasons why fraud has been able to spiral out of control.

The global accounting and consulting firm surveyed respondents from across the public and private sector to gauge the state of fraud, finding that 48% of participants have witnessed more fraudulent incidents this year compared to earlier years, and 35% felt it has increased since the start of the Covid-19 pandemic.

Asked where fraud is most likely to take place, respondents pointed at the two business functions that have the easiest access to spending money: procurement and finance:

In which areas of your business has fraud been perpetrated or is most likely to be perpetuated?

Cybercrime is viewed as the largest contributor to fraudulent cases, with 24% of respondents stating that they have experienced this type in the past two years. Financial misreporting ranks second, followed by procurement fraud and misappropriation of assets.

What type of fraud/misconduct/malpractice has your firm experienced over the last two years?

The large uptake of digital ways of working – a trend massively accelerated by the Covid-19 pandemic – is considered the top reason for the higher fraud exposure, as most organisations weren’t able to scale their risk management and IT controls at the same speed as which they scaled their digital agenda.

The transition to remote working ranks second, highlighting the lack of preparedness of many businesses in terms of IT security protocols and processes. Meanwhile, digital-induced financial crime continues to rise in the Middle East, as well as globally, as e-criminals capitalise on the growing number of digital avenues for potential theft of data or funds.

Due to the change in the economic environment, which of these options do you think has contributed the most to increasing your organisation’s fraud risk?

Looking ahead, nearly three quarters of respondents said that fraud risk is likely to increase in the coming years, and just as noteworthy, the impact of fraud cases (for example: the amount of revenue lost due to fraud or the negative impact on reputation) is expected to rise.

Do you believe that the current business and + What percentage of your organisation's total revenue has been lost

Fraud risk management

With this in mind, Deloitte’s experts have a clear advice for risk managers: invest in an effective fraud risk management framework. Such a framework consist of a series of pillars which combined help mitigate, manage and resolve fraud more effectively. Pillars include:

Anti-fraud culture: the promotion of an anti-fraud tone and culture by leadership is a key pillar of every fraud risk management framework.

Past fraud analysis: an effective fraud risk management programme takes learnings from past fraud incidents to fine-tune the framework and prevent similar frauds from occurring in the future.

Proactive fraud risk assessment: periodic assessment and review of the likelihood and impact of different fraud scenarios along with an assessment of the organisation’s preparedness against such fraud risk should be the foundation of risk mitigation.

Which of the following is the most significant contributor to fraud risk in your organisation?

Anti-fraud technology solutions: the use of tools and technology for real time/ near real time ongoing monitoring of the potential fraud risks is critical to prevent fraud incidents in the future.

Whistleblowing: a whistleblowing policy that ensures no retaliation occurs against the reporter, and an efficient whistleblowing mechanism is vital to detect fraud early on.

Investigations: established procedures for the investigation of suspected frauds must be in place to ensure a transparent and effective investigation.

Periodic training and awareness: proactive awareness campaigns and training for employees on emerging fraud risks can resulted in reduction of fraud

Deloitte’s Middle East Fraud Survey was led by partners Collin Keeney and Neil Hargreaves, and assistant director Prabodh Newar. All three are based in the United Arab Emirates.