Vendor Fraud is Estimated to Increase in 2021
Vendor fraud is one of fraud categories which are estimated to continue to increase in 2021
Despite the optimism that Covid-19 pandemic will end soon, until the beginning of this year, businesses around the globe continue to grapple with the economic crisis and the implementation of health protocols, including large-scale social restrictions that are still in effect to date. These factors have contributed to the increasing potential for fraud since the beginning of the pandemic last year.
Based on a survey conducted by ACFE in November 2020, 79% of respondents said that they felt an increase in the overall level of fraud compared to August of the same year. As many as 38% noted this increase was significant. They estimated that until 2021, the fraud trend would likely continue.
Nearly half of the respondents in the survey worked in the banking and financial services industry (23%) or the government and public administration sector (22%), and another 17% worked in professional service organizations. A total of 38% respondents were distributed to other industries. Most of the respondents (61%) are in-house fraud investigators within a company or agency.
The increased fraud by vendors
From the survey, respondents also revealed 12 fraud risk categories, which are estimated to have increased since the beginning of the pandemic and are expected to continue to increase in 2021. One of these categories is “fraud by vendors and sellers.” As many as 80% of respondents saw that the risk of fraud in this category would still increase in the next year.
In this uncertain situation, both government and private institutions tend to make decisions very quickly and cut many unnecessary costs. In addition, large-scale social restrictions and remote working policies made controls more tenuous and decentralized. All of these factors provide greater opportunities for rogue vendors to take advantage of the situation to make more profits in an unethical way.
To reduce the risk of vendor fraud occurring in the midst of a seemingly never ending pandemic, companies need to be more agile and consistent in implementing anti-fraud processes, be more rigorous in vetting potential vendors and monitoring existing vendors.
Vetting potential vendors and monitoring existing vendors are among the challenges for organizations during this pandemic. That being said, organizations need to rely on and take advantage of anti-fraud technologies.
Know Your Vendor
Integrity Indonesia with up to more than fifteen years of experience in the compliance industry offers a comprehensive due diligence service through Know Your Vendor™.
Know Your Vendor™ solution helps our clients mitigate supply chain risks by providing a consolidated panorama for due diligence on third parties. Using the most recent technologies to monitor clients’ supply chains, Know Your Vendor™ allows clients to import their vendors and assign to each of them a questionnaire, which is a critical step for the due diligence process. Clients can follow the progression of the due diligence in real time, as well as access the report and score at a click of a button.
For more information on Know Your Vendor™ and other compliance services of Integrity Asia.