Organisations’ networks are vulnerable and external fraudsters are becoming a bigger threat as attacks increase.
Cybercrime tops the list of current threats facing businesses, while emerging risks from ESG-reporting fraud and platform fraud could impact businesses in the future.
The tech, media and telecommunications sector experienced the highest incidence of fraud across all industries according to the latest PwC Global Economic Crime and Fraud Survey.
“In Ireland, in our experience, we have seen increased levels of cybercrime since the onset of the pandemic”
The survey shows that organisations’ networks are vulnerable and external fraudsters are becoming a bigger threat as attacks increase and become more sophisticated.
Cybercrime poses the biggest threat to small, medium, and large businesses, after the impact of hackers rose substantially over the last two years.
New era of platform fraud
The rise of digital platforms opens the door to a myriad of financial crime risk – 40% of those encountering fraud experienced some form of platform fraud.
In this year’s survey results, cybercrime came in ahead of customer fraud, the most common global crime in 2020, by a substantial margin. 42% of large businesses reported experiencing cybercrime in the period, while only 34% experienced customer fraud.
“Environmental, geopolitical, financial and social pressures are creating a risk landscape that is more volatile than ever,” said Pat Moran, PwC Ireland Cybersecurity & Digital Forensics leader.
“At the same time, we’re seeing an increase of threats from outside the organisation as bad actors form fraudster groups to infiltrate digital platforms. Organisations need to be more agile than ever to respond to these converging threats, and adopt new approaches and technologies to predict and prevent fraud.
“In Ireland, in our experience, we have seen increased levels of cybercrime since the onset of the pandemic, particularly phishing and ransomware attacks, partially driven by increased remote working and also by an increased sophistication of the cyber criminals.
“We continue to be a target for cyber criminals due to our large concentration of foreign direct investment. Although the Government has recently strengthened our national defences, we continue to be on high alert”.
Forty percent of organisations encountering fraud, experienced digital platform fraud. The rise of digital platforms, such as social media and e-commerce, opens the door to fraud and economic crime risks. Platform fraud is not simply an IT cybercrime threat – it is an organisation-wide threat which requires an organsiation-wide, cross-functional effort with a diverse community of solvers.
Other emerging risks, including ESG (environmental, social, governance) reporting fraud (the act of altering ESG disclosures so that they do not truly reflect the activities or progress of an organisation) and supply chain fraud, have the potential to cause greater disruption in the next few years.
For example, just 6% of organisations said that they experienced anti-embargo fraud (participation in unsanctioned foreign boycotts) in the last 24 months. But that may change in the next 24 months as global sanctions rise to the highest levels in recent history.
Similarly, just 8% of those organisations encountering fraud in the last 24 months experienced environmental, societal and governance (ESG) reporting fraud. Yet, as ESG continues to increase in importance to stakeholders, the incentive to commit fraud in this area may grow.
Similarly, one in eight organisations experienced new incidents of supply chain fraud as a result of the disruption caused by Covid-19, and one in five sees supply chain fraud as an area of increased risk as a result of the pandemic.
New thinking is needed
The survey finds that threats from external actors are increasing, with perpetrators quickly growing in strength and effectiveness. Nearly 70% of organisations experiencing fraud reported that the most disruptive incident came via an external attack or collusion between external and internal sources.
Respondents indicated they are strengthening internal controls, technical capabilities and reporting to prevent and detect fraud. However, defending against new external threats requires a different set of tools – it is unlike the effort to contain internal fraud because companies have little ability to influence or control the actions of external perpetrators through traditional fraud prevention tools such as codes of conduct, training and investigations.
Deirdre McGrath, partner, PwC Ireland Forensics & Transaction Services, concluded: “With external fraud growing, companies must think more creatively to help shore up and protect their perimeters. Understanding the end-to-end lifecycle of customer-facing products, striking the proper balance between user experience and fraud controls, and having a holistic view of data will help arm businesses in the never-ending fight against fraud.”