Rising fraud: Four strategies to protect your business in 2021

Fraud and financial scams skyrocket during times of crisis. COVID is no different, and its unique impact has created a perfect storm for criminals. The pandemic forced many businesses to adapt quickly. From mapping new customer journeys to the mass relocation of employees working from home, managers have struggled to maintain policies that protect the business from fraud. The upheaval we have all lived through has created fertile conditions for criminal activity, both  now and in the future.

As lenders prepare to return to a post-COVID normal, how can we be better  prepared to protect ourselves against emerging fraud opportunities and scams?

Here are four strategies to mitigate against internal and external fraud.

1. Exercise rigorous honesty

Investigate whether your business has been affected by fraud during the pandemic, then work with internal teams to assess the effects. Have the changes you’ve made to your business put you at higher risk for fraud? If so, what are the warning signals that you may be at increased risk? What are the policies and procedures you’ve put into place to protect yourself? These are tough questions to be sure, but practicing rigorous honesty is the best way to protect yourself going forward.

2. Don’t cut back on audit and compliance

In times of economic crisis, employees’ personal financial pressures tend to rise, which is often when the decision to commit fraud begins. Ironically, it’s during these tough economic times that companies look to save money wherever they can.

Non-revenue-producing departments are often first to feel the pinch, including internal audit and compliance, but now is not the time to be cutting back on your capacity to fight fraud.

3. Your employees are your best defense

Your employees are your first, best defense against fraud. Get serious about educating them around email attack techniques and phishing. With so many teams working remotely, it’s important to remind everybody about your code of ethics and what resources are available to support them should they suspect fraud. Your employees are your most valued anti-fraud partners; make sure they know that.

That goes double for your network of vendors, third parties and other business partners. These extended networks can be a stress point for fraud, so make sure you have an ongoing conversation with them about fraud and coherent policies in place to manage the threat.

4. Modern lending systems protect against fraud

Modern lending systems are designed to offer a robust defense against fraud. State-of-the-art security and encryption are built in from the ground up. From the credit department to compliance, teams work within a similar user interface. This means there are fewer “gray zones” where fraud can occur. Because everybody understands the system they work on every day, everybody can be on guard against fraud.

Finally, transactional fraud leaves electronic footprints. You can proactively guard against this kind of fraud with special fraud-detection technology that leverages advanced analytics and artificial intelligence. Modern lending systems are adept at flagging patterns that could signal fraud.

Companies that still rely on backdated systems that have been cobbled together are more vulnerable than ever to emerging fraud threats, and are low-hanging  fruit for both internal and external fraudsters.

Vlad Kovacevic is the founder and CTO of Inovatec Systems. JAVELIN by Inovatec is a state-of-the-art lending platform that provides lenders with security features that help make organizations and extended stakeholder networks anti-fraud partners.