How to Prevent Fraud During the COVID-19 Pandemic

by Darin Styles, CPA, CFE

Over the last few months, life in the U.S. has been upended in ways previously unimagined. This rings especially true for business owners like you. In addition to ensuring the safety of your staff and customers, you’ve had to worry about keeping your business alive. Perhaps you’ve had to revamp your service model, navigate the complexities of a PPP loan, or design a new staffing configuration—all while dancing around changing government regulations. It’s been an intense season, to say the least.

Yet despite the heavy load on your plate, there’s something else you should be thinking about, too: fraud.

Yes, there are people in this world who prey upon vulnerable businesses, even during a global pandemic. But thwarting their malicious efforts is easier than you think. Here are four things to consider when preventing fraud in the age of COVID-19.

Your internal controls could be compromised.

Many businesses quickly pivoted to a remote-work configuration as soon as stay-at-home orders went into effect. This arrangement has its obvious pros and cons. One glaring downside: employees working from home aren’t observed as they normally would be in the office. In other words, there’s little chance of a supervisor popping in an office or glancing over shoulders. This reduced “threat of detection” can easily create new opportunities for fraud.

It’s worth taking a moment to ask yourself: Could less monitoring lead to opportunities for fraud in your organization?

Don’t lose sight of segregation of duties.

Simply put, “segregation of duties” means you don’t allow one person to be involved in two processes that have a conflict of interest. It’s a fundamental component of an effective system of internal controls and a key measure of fraud prevention. But having fewer employees on staff or in the office may mean fewer people are there to cover daily tasks. If you’re not careful, temporary solutions to disruptions in work processes could reduce the effectiveness of your control system.

To prevent a lapse in your segregation of duties, assess who’s doing what and how roles may have changed since the pandemic started.

Know who has access to what—and when.

With employees working remotely, it’s likely you’re having to electronically share assets that might have otherwise been shared in person. This could inadvertently give more individuals access to the asset, which could be an issue if it contains sensitive information. Additionally, electronically shared assets may no longer have appropriate chronological documentation or a paper trail that was required by the old system of internal controls.

Now more than ever, it’s important to know an asset’s “chain or custody,” which is the sequence of people who have had custody of it. Doing so can keep an asset from falling into the wrong hands.

Consider reevaluating your workflow procedures to ensure they don’t involve more individuals than necessary, especially as you begin to shift back to “normal” operations.

Be skeptical.

This is a tough one. It’s hard to imagine a trusted employee committing fraud, but it happens. For this reason, be critical of explanations an employee may offer for why something happened the way it did. The COVID-19 situation makes us want to be compassionate and understanding, but don’t let your good heart cloud your judgement. If you think something seems fishy, be diligent about getting to the bottom of it as soon as possible.

Protect your business from the threat of fraud.

In the midst of a global pandemic, it’s easy to let fraud prevention fall by the wayside. But now is not the time to ease up. Taking small steps to prevent fraud, such as the ones I mentioned here, can help to keep your business safe from this threat. If you’d like to explore your options for preventing and detecting fraud in your business, contact us today.