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Trends in fraud

Gateley Omega

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Just as water always finds the path of least resistance, fraudsters constantly uncover fresh opportunities to exploit weaknesses in companies’ and individuals’ defences.

Tracking recent, current and imminent trends in fraud shows us that wherever new technologies, situations or ways of working emerge, determined or opportunistic individuals will be ready to take advantage of the potential to take assets that don’t belong to them. 

The challenge for legal and investigation professionals is to be as up to speed as possible with current and emerging patterns, whether that’s organised widescale fraud enacted on vulnerable people and organisations, or fast-moving trends emerging as a result of the adoption of new technologies.

Recent trends

Targeting less protected sectors

Over the past few years we have seen incidences of fraud spreading to sectors that were not previously targeted at scale, including academia, NGOs and charities. Such sectors do not always have the same stringent internal controls and structures to prevent fraud and tend to be less prepared for attacks than corporate entities such as banks or FMCG companies.

Examples we’ve seen include predatory publishing and conference fraud, where academics are invited to pay up front for publication and speaking opportunities, only to find that while they may well exist, they are sub-optimal and deliver low value.

A second example is where charities are tricked into paying out funds to fraudsters using sophisticated phishing techniques that single out executives (a scheme well known as ‘spear phishing’ or ‘CEO fraud phishing’). In the past such schemes targeted large international companies, but they became well-known and companies put in various defence mechanisms. As a result, fraudsters adjusted their strategy by targeting less prepared and less cautious NGOs and charities.

A third example involves fraudsters targeting vulnerable and elderly individuals to encourage them to buy expensive medical equipment. This has happened in collusion with the individuals’ doctors, netting hundreds of millions of dollars in the process.

Global money laundering techniques 

Another recent trend has been the use of more complicated schemes of fraud and money laundering utilising shell companies, offshore banks and unscrupulous professional ‘enablers’. 

Funds stolen from institutions or companies, received as bribes or generated through criminal activities can be quickly and covertly laundered through shell companies’ accounts in offshore financial institutions around the world. 

The ease of setting up or buying shell companies (that are pre-packaged with nominal directors, shareholders and bank accounts) together with widely available internet and mobile banking technologies makes it possible to quickly and covertly move significant amounts of money on a global scale from anywhere in the world. Fraudsters utilise these techniques and make it extremely difficult for investigators to identify and recover illicitly obtained assets.

Current trends

Use of cryptocurrencies and other digital assets

One of the biggest trends we are seeing right now is for fraudsters to convert stolen assets into digital assets such as cryptocurrencies, prepaid cards or mobile accounts rather than launder money through more traditional channels. Since digital assets are inherently more complex, as well as anonymised, it is harder and more time-consuming to track funds stolen in this way.

Digital infiltration

Another technology-driven trend is the appropriation of personal identities via digital channels, including messaging, chat, text, voice and email. As businesses become more digitised in an effort to reduce costs and increase productivity, automated communications become more common and embedded in business processes, opening up the risks of fraudsters impersonating customers or senior managers to advance their goals. They can successfully ‘mix and match’ technology, social engineering and old-style fraud techniques to overcome controls and systems designed to protect organisational or personal assets.   

Future trends

Fraudsters will continue taking advantages of new technology trends such as cryptocurrencies and ultra-interconnected financial institutions and their payment networks. We will also see more ‘social engineering’ attacks on vulnerable people as automation advances.

One of the impacts of the technology advancement is the adoption of remote working, which is rapidly reshaping work patterns. Banks, insurance companies, lawyers, accountants and consulting firms will become more and more digital and mobile and extend the remote working regime to operations that were previously done face-to-face. It will be more difficult to verify information and double check that people are who they say they are. Automation of processes that previously required human interactions, such as signing contracts, will introduce new risks to be aware of. 

In the years ahead, corporates, law firms and investigation professionals will find it more and more difficult to navigate complex cases of fraud. Compliance, raising awareness, training and education should be on the top of every board’s agenda – only then can they be aware of the new and rapidly unfolding areas of risk their organisations face.

Learn more from Mikhail Lastovskiy, Head of Forensics & Business Intelligence:

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We have extensive experience in conducting fraud and financial investigations on behalf of banks, corporate and financial services organisations, as well as ultra-high-net-worth individuals and foreign regulatory authorities. We can also help you to ensure you have the correct systems, practices and policies in place to minimise your risk of experiencing to fraud.  

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