While it ‘tis the time to be jolly and full of festive cheer, companies are warned not to let their guard down this Christmas. Fraud risks are ever present but the time of Christmas brings with it additional fraud risks for unwitting companies.
Money can be tight around this time of year with higher than usual personal expenditure leading to pressures on employees and third parties, such as customers and suppliers, which can raise fraud risk. After all, fraud is very much a personal and behavioural crime. The year end is often a time when targets and bonuses are assessed and so there is also an incentive for employees to attempt to overstate performance to hit targets.
For many businesses the lead up to Christmas can represent a boost in demand. This can lead to employing temporary staff, which can bring about additional fraud risk if such staff are not adequately vetted or don’t have the organisation’s culture embedded. Conversely, between Christmas and New Year, many businesses wind down with many staff taking time off. This can result in less supervision and a lack in segregation of duties, providing increased opportunities for the fraudster. In the last eighteen months, we have seen a marked rise in ‘payment diversion fraud’; in this scenario fraudsters use social engineering techniques to change an employee's supplier bank details to divert funds to themselves. Use of temporary staff or absence of usual staff may increase this risk. Coupled with increased bonus payments to employees around this time of year may also pose an opportunity that is hard to resist for a determined fraudster.
You must also be aware of the ever increasing threat of cybercrime. Hackers are often looking for weaknesses in a company’s defences. We have recently seen that during the festive season, when companies have skeleton IT staff, opportunists use this time to strike.
We have also seen viral festive emails and games being hijacked by hackers and loaded with computer viruses and other malware. These can often quickly spread by those both within and outside of the organisation quite unwittingly.
Historically, this is also the time of heightened risk of break-ins and so companies should ensure that valuables, such as expensive IT equipment, is safely locked away. Fraudsters often rationalise their behaviour. They may believe they are only ‘borrowing’ the money from their employer to tide them over an expensive Christmas. Examples of this might be claiming false expenses or delaying corporate credit card payments (but claiming the expense). Also, the lack of wage increases or promotions in recent times may also lead to employees being disgruntled and feeling they are owed something from their employer.
"It’s particularly worrying that fraudsters often rationalise their behaviour,” said Priya Giuliani, partner in KPMG’s Forensic Rick Consulting practice. “They may believe that they are only ‘borrowing’ the money from their employer to tide them over an expensive Christmas, but the fact is that their actions can have serious repercussions on an organisation’s financial stability. It’s something that cannot be ignored because, if it is, any business falling victim to fraud is more likely to be a ghost to Christmas future."
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.