COVID -19 Quick Check For Fraud

5 Mins read

To accommodate remote work requirements organizations continued to make changes to technology infrastructure. For the information technology team, remote work is common but there are many other departments this may be the first time. Over a few weeks, many organizations continued to make emergency changes to ensure the business continues without interruption. As a result, organizations are exposed to cybersecurity vulnerabilities and you will find a lot of information on how to manage cyber threats. The other most important area that needs attention is “Fraud” and many small to medium organizations are not ready or have not considered fraud risk.

In today’s blog, we have shared information about fraud basics and quick tips. The fraud schemes such as internal and external defraud companies, and other techniques such as the Ponzi scheme, identity theft, skimming, etc. defraud individuals.

Internal Fraud – Committed by employees, manager, officers, or owners of the company

External FraudCommitted by customers, vendors, and other parties

Internal frauds are illegal acts of employees against the company and examples include:

  • Trading – Unauthorized trading, misappropriation of assets, insider trading
  • Corporate Finance – Misuse of sensitive information, loan fraud, transaction not reported
  • Other Examples – Theft of cash, not charring friends/families, supplying receipts for refunds, destruction of assets, forgery, impersonation, bribery, corruption, etc.

External fraud covers a broad range of schemes by customers, vendors, and other parties. The threat of security breaches, stealing intellectual property, tax fraud, hacking, bankruptcy fraud, and loan fraud.

According to 2018 Association of Certified Fraud Examiners (ACFE), common occupational fraud schemes in various industries are as follows:

IndustrySchemes (2018 ACFE Survey Report)
Banking/ Financial ServicesCorruption, Cash on hand, Cash larceny, Check and payment tampering, Noncash, Billing
ManufacturingCorruption, Billing, Noncash, Expense Reimbursement, Cash on hand
Government/Public AdministrationCorruption, Billing, Noncash
Health careCorruption, Billing, Noncash, Expense Reimbursement
RetailNoncash, Corruption, Billing, Expense reimbursement
EducationCorruption, Billing, Cash larceny, Cash on hand, Noncash
TechnologyCorruption, Billing, Noncash, Expense reimbursement, Financial statement fraud

Per 2018 ACFE report, the common asset misappropriation sub-schemes with greatest risk are:

Non cash, Billing, Cash and Payment Tampering, Cash Larceny, Skimming, Payroll, Expense Reimbursement, Cash on hand, Register Disbursement

Corruption represents one of the most significant fraud risks for organizations in many industries and regions. Common corruption schemes:

  • Conflict of interest – Personal or economic interest in a transaction
  • Bribery – Commercial Bribery and Official Bribery
  • Kickbacks – Commercial or business advantage
  • Illegal Gratuities – Reward to an employee after the decision has been made
  • Economic Extortion – Demand for money or other consideration using actual or threatened force or fear

Other common types of fraud include but are not limited to:

  • Invoice manipulation through collusion
  • Billing for services not rendered and collecting the cash
  • Seizing checks payable to vendors
  • Adding fictitious employees and collecting the paychecks (impersonation)
  • Not removing terminated employees from payroll and collecting the paychecks
  • Paying for personal expenses with business cash
  • Recording fictitious transactions on the books to cover up a theft
  • Falsifying timesheets for a higher amount of pay
  • Pilfering stamps
  • Stealing (e.g., cash, petty cash, supplies, equipment, tools, data, records, etc.)
  • Forgery (not just check forgery, e.g. forging department head signatures on purchase orders)
  • Pocketing payments on customers’ accounts,
  • Issuing receipts on self-designed receipt books
  • Not depositing all cash receipts

How do you?

COVID 19 Quick Checklist                                                                                            R- Review

AC – Additional Checks or Testing

#Questions RAC
 Incident Management  
 Ensure that adequate support staff is available to address the questions from remote workers and resolve the issues in time  
 Check the incident backlogs and review if high- risk issues are addressed on high priority  
 Check if the employees are notified and aware of the security incident procedures  
 Emergency Changes  
 Without having a strong emergency change management process in place, the review of emergency changes is a high priority  
 Lack of categorization and risk rating for emergency changes means a review of a larger sample of changes.  
 Risk Review  
 Perform the sample check of change management risk assessment forms for the changes implemented during the last eight weeks  
 Review emergency risk assessment forms where assessment is performed after the implementation of emergency changes.  
 Ensure risk are defined and rated as per risk register in change risk assessment forms  
 In the absence of Risk Register ensure that risks are defined, categorized, and rated properly  
 Ensure that controls mentioned in the risk assessment forms are valid controls including compensating controls  
 Ensure forms are valid and some of them may need periodic review  
 Firewall Changes  
 Review firewall change approvals  
 Review firewall change logs and change approvals for selected  
 Review all firewall changes related to third party requirements  
 Physical Security  
 Check with the facilities department that physical security checks are in place for any employees reaching office and proper approval is in place before allowing anyone to enter the premises.  
 Cybersecurity Checks  
 Check the most recent laptop imaging standards and review procedures for secured connections  
 Check the recent reports for application antivirus, DLP, and software patch updates  
 Question if the number of laptops without the latest patches and updates is above the threshold  
 Check the privileged access granted to third parties to access the production data, sensitive data, privacy data, and applications remotely  
 Verify if the logs are maintained and reviewed for privileged access especially changes to applications in a production environment  
 Check if screen lock settings are functioning as intended  
 Check the cyber threat reports during the last eight weeks and review how the high-risk threats are addressed and check if timely actions were taken  
 Review remote access approvals for sensitive data  
 Business Continuity/Disaster Recovery  
 Review incident tickets created for backup issues within the last eight weeks  
 Check for major issues and how it is addressed  
 Check for the latest backup details and no issues reported  
 Data Security  
 Check with the encryption team if they have reported any issues and any incident ticket is pending resolution  
 Check if the new laptops have proper encryption controls in place  
 Physical Security  
 Check with the facilities department that physical security checks are in place for any employees reaching office and proper approval is in place before allowing any one to enter the premises  
 Conduct inquiry and perform a high-level review of high-risk compliance controls  
 Review any major issues reported impacting compliance  
 Customer Complaints  
 Check the customer complaint tickets and volume of the tickets during the last eight weeks compared to earlier  
 Check for repetitive and major high-risk issues and resolutions in place or pending status  
 Check if the training such as phishing, ransomware, malware, etc. is conducted at least once during the last eight weeks. Ensure employees are aware of what needs to be protected.  
 Ensure employees are aware that hardware is not shared while working from remotely  
 Fraud Checks  
 Especially important for certain clients. Checks from the fraud perspective are important and ensure processes and controls operating as intended  

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