Are we ready for what future fraud holds in store for us?

We have observed that in the past few years, fraud and cybercrime are growing both in numbers and potential to cause loss. Businesses have experienced incidents that were once atypical are now becoming increasingly common.

Many factors are driving this increase and it is very difficult to anticipate what the future holds. Here are some views on the outlook for fraud detail, among other aspects;

1. Increased corruption of employees

This refers to the employee who, for a number of ethical and moral reasons, decides that it is easier to earn money in other ways than working and, alone or in collaboration, decides to defraud.

Moreover, they are increasingly technocrats dedicated to fraud, “techno-fraudsters” who are well trained and knowledgeable about business and markets and whose only concern is to make money, as quickly as possible.

They use their knowledge and training and take advantage of the ignorance of others in the organisation to mislead them with technicalities and commit illegal acts.

2. An increased presence of organised crime

Alongside these trained employees, more and more mafias are appearing whose only activity is to engage in crime.

Organised fraud is responsible for most external fraud and almost all digital fraud or cybercrime.

In addition, they are highly dangerous when they obtain the intentional or unintentional collaboration of someone inside the company.

3. More opportunities for traditional fraud

Successive crises and the need to grow and win new markets have led many companies to cut costs and to underestimate risks.

New products are launched without good operating procedures and without adequate training of the employees who will operate them. This creates new opportunities for fraud due to operational errors.

The increased speed and mechanisms for the movement of funds is also an accelerator of fraudulent activities and a barrier to tracing them.

In addition, new counterfeiting techniques such as deepfake are also a gateway to new frauds or to a more successful exploitation of known frauds.

4. Greater threats which favour digital fraud or cybercrime

The interdependence of networks and the increasing digital interconnectedness of people, things and organisations increases the potential for attacks on system availability that will disrupt operations and affect productivity.

Of particular concern are attacks on critical infrastructures that could cause cascading crashes and unforeseen disruptions to society.

The proliferation of the Internet of Things (IoT) will see ransomware evolve from traditional extortion to new targets, focusing on internet-connected smart devices and less traditional, more profitable targets.

5. Increased Misinformation and Increased Information Losses

Smart fake accounts will be extremely efficient at disseminating lies and spreading distorted information across multiple social media platforms.

Attackers will succeed in tarnishing the reputation and operational effectiveness of their target. Societies will continue to be confronted with fake news and electoral manipulation, and the perception of a breach of the democratic system will grow.

Customer and product disclosures and corporate secrets will continue to leak.

6. The impact of technological developments on the commission of fraud

Fraud and attacks will be accompanied by the latest technological advances. It is still too early to know what the consequences of the application of AI, IoT or blockchain in the commission of fraud will be, along with the extent of new damage and the costs associated.

What is certain is that AI-enabled malware amplifies the capabilities of attackers. This malware will be able to learn from its environment and adapt to discover or create new, unpredictable vulnerabilities.

It is also likely that hackers will be able to compromise blockchain networks to send falsified information, create and authorise fake transactions and commit fraud.

7. Increased difficulty for the legal battle

The trend is towards multi-jurisdictional frauds, frauds that are carried out in one or more countries and the funds are transferred to other countries.

In such cases, it is extremely difficult to take and coordinate legal action in different countries, in addition to the differences in the treatment and criminalisation of illegal activities between countries.

Another trend is that fraudsters are prepared to fight a legal battle, even claiming damages against the company.

Customer and product disclosures and corporate secrets will continue to leak.

To recapitulate…

Fraud has not only increased in recent years, but it has also become more ingenious.

Its impact reaches globally across all sectors and areas, public and private organisations, and not only that, our clients, users and, sadly, employees, have become the protagonists of these real stories.

Fraud is therefore a cardinal concern in all organisations, and in society as a whole.

We are in the age of data and Artificial Intelligence technologies, and these, together with expert knowledge, will be the great allies in the fight against fraud, being able to analyse millions of data and detect anomalous patterns that are escaping manual supervision.

The traditional mechanisms for tackling these practices are based on knowledge and experience, knowing how they occur and incorporating processes that alert to suspicious attitudes.

However, this is only the tip of the iceberg. Most frauds are not known and bypass these control mechanisms. The second major barrier is the speed with which fraud mutates, always looking for new ways to profit illegally, bypassing controls and going undetected.

And the question is…

Are we prepared for the future of fraud?

This question is not easy to answer, but as an organisation we should carry out a rigorous and continuous analysis of current fraud risks and incorporate the most cutting-edge tools that digitalisation is offering us, which will undoubtedly be used by our adversaries (technology is at the same time the friend-enemy of fraud).

Incorporating predictive modelling and Artificial Intelligence for prevention, detection, prosecution and continuous improvement is vital. If we are not prepared to use these tools effectively in our fight against fraud, the answer to the question is probably “no”, and by the time we want to start, it may already be too late.

Author of this article:

Marta Villén Sotomayor, Secretary General of the International Cooperative Fraud Prevention Association (ICPF).

Innova-tsn collaborates with ICPF. Here you can watch the webinar we held on 16th  December: “Analytical Support for Fraud Identification”. In this session, Arantxa Ortiz, Head Of Advanced Analytics & Big Data at Innova-tsn shared the key ways to adopt a comprehensive strategy for a permanent fight against fraud: Knowledge, Efficiency and Persistence.