KPMG in Canada survey finds 85 per cent of organizations are looking at emerging technologies to cut fraud risk
A majority of businesses across Canada experienced some form of fraud over the past year as scammers grew increasingly sophisticated, causing most organizations to look to new and emerging technologies as ways to reduce their risk and fend off potential attacks.
A recent survey of more than 500 small and medium-sized enterprises across Canada found three-quarters of respondents experienced either internal fraud (by an employee) or external fraud (such as credit card fraud, fraudulent cheques, false invoices, or identity fraud by hijacking bank accounts) in the past year.
That’s despite the fact that 87 per cent of businesses said they had a program in place to prevent, detect and respond to fraud. Interestingly, only 38 per cent of businesses ‘strongly agreed’ and 49 per cent ‘somewhat agreed’ with that statement.
“Even though most companies have existing fraud programs in place, many of them are falling short, and clearly, there’s a need for improvement,” says Marilyn Abate, a partner in KPMG in Canada’s Forensic and Financial Crimes practice. “The threat landscape is constantly changing as fraudsters are continually devising ways to bypass and circumvent the prevention controls organizations implement. So even if companies think they have an effective anti-fraud program in place, it won’t be long before it’s cracked by a criminal. Businesses need to stay ahead of the threat.”
The Canadian Anti-Fraud Centre received 90,137 reports of fraud last year, with a reported $530 million in losses, up from $379 million in 2021 and $165 million in 2020.
“Technologies such as artificial intelligence (AI), machine learning and biometrics are effective tools to prevent and detect fraud, even more so when they complement strong fraud risk management frameworks, says Ms. Abate. “Companies need these technologies to provide nimble and strong protection to combat an ever-evolving fraud landscape. If they don’t invest in the tools and processes to combat fraud, they could be at risk of significant losses.”
Indeed, KPMG’s survey found companies overwhelmingly recognize they need to make significant changes to their operating environments to manage their fraud risk, with most (85 per cent) saying they’re actively considering investing in these new technologies.
Crypto fraud on the rise
Cryptoasset fraud has become a more popular type of fraud over the last few years as crypto ownership has increased. Globally, cryptocurrency-based illicit transaction volume hit an all-time high of US$20.6 billion last year, according to Chainalysis’ 2023 Crypto Crime Report.
Alternative payment methods such as cryptocurrency often have higher fraud rates since controls and regulations are not yet fully established. Fraudulent cryptoasset exchanges are a source for various types of investment schemes, where scammers promise lucrative returns to unsuspecting victims.
While cryptoasset exchanges are required to register with regulators in Canada, many have not done so. As a result, it can be difficult for investors to determine whether a cryptoasset exchange is trustworthy. Since July 2020, the Ontario Securities Commission Contact Centre had a 200 per cent increase in crypto-related complaints.
“Registering with regulators is a ‘must do’ if cryptoasset platforms are to gain trust from investors, but there are other things they can do as well, including optimizing their technology platforms for monitoring and screening large transactions, and designing and implementing strong risk management and technology governance frameworks,” says Kareem Sadek, Partner, and Co-leader of the Cryptoassets and Blockchain practice at KPMG in Canada.
Fraud detection and response tips
Myriam Duguay, a Partner in Forensics at KPMG in Canada says having an effective anti-fraud program in place and monitoring third-party risk are two key considerations for preventing and detecting fraud in all sectors. Indeed, KPMG’s survey found just over one-third (35 per cent) ‘strongly agree’ their company proactively manages their business and third-party risk to maintain stakeholder trust, and more than half (52 per cent) ‘somewhat agree’.
“This suggests that many companies still feel they need to do more work in getting a fully transparent picture of their suppliers and contractors – and that’s a key ingredient in any successful anti-fraud program,” says Ms. Duguay.
Ms. Duguay recommends the following to help organizations prevent, detect, and manage fraud:
- Establish, implement, and constantly update an enterprise-wide anti-fraud program including a fraud risk assessment
- Actively and frequently monitor and assess third-party risk
- Set up a whistleblower line/program
- Implement anti-fraud training for staff
- Employ active surveillance and data monitoring – forensic data analytics
- Align fraud, financial crimes, and cybersecurity operations
For more information on KPMG’s Fraud and Forensics practice, and Fraud Prevention Month, click here.
About the KPMG Business Survey
KPMG in Canada surveyed 505 Canadian companies between February 3 and February 16, 2023, using Schlesinger Group’s Methodify online research platform. All respondents are business owners or executive-level decision makers. Forty-four per cent helm companies with more than $500 million in annual gross revenue; 20 per cent, between $300 million to $499 million; 16 per cent, between $200 million and $299 million; 16 per cent, between $100 million and $199 million; and, the remaining 4 per cent, between $50 million and $99.9 million. Seventy-seven per cent of the companies are privately held and 23 per cent are publicly traded. Forty-four per cent are family-owned businesses.
This article was originally sourced from www.newswire.ca