Don’t Let Fear and Confusion Lead to Fraud

March 06, 2020

By Hubert Klein and Amy Fitzgerald

We are currently experiencing a climate of uncertainty, be it health, political, economic and so forth. Such climates can lead to fear and confusion amongst both businesses and individuals, creating the opportunity for incidents of fraud to flourish. While businesses are (or at least should be) always on the lookout for signs of fraud, when fear and uncertainty impact our daily lives and the economy as a whole, businesses tend to let their guards down.

At times like this, companies and individuals should be even more diligent in their ongoing fight to deter, detect and combat fraud because fear and confusion create the perfect fraud storm. It is no secret that global criminal organizations continually look for ways to implement potential fraud schemes. With the entire world closely following and being impacted by the coronavirus outbreak, might now be the opportune time for fraudsters to inflict damage on unsuspecting victims such as businesses? 

Some of the common ways fraudsters try to take advantage of a disaster or crisis is via:

  • Corporate IT System Intrusion – Use of phishing schemes or emails to get employees to provide responses and/or authorize responses for sensitive information to what look like company initiated inquiries.
  • Fake Solicitation or Inquiries – Use of emails, phone calls and social media outreach targeting company employees to solicit fraudulent contributions to assist with crisis prevention and/or remediation.
  • Fake Bitcoin Donation Solicitations – Solicitations for legitimate organizations such as the CDC or other governmental health agencies. Bitcoin provides an especially unique opportunity for fake solicitation schemes due to its untraceable nature.
  • Pump-and-Dump Schemes – Securities fraudsters use fear and uncertainty to run “pump-and-dump” schemes on unsuspecting investors. This is where stocks are artificially inflated through false reassurances and positive statements and then promptly sold by shareholders.
  • Billing and Invoicing Schemes – Prices being charged far exceed the norm and are not supply-and- demand related. There have been many instances in the news about how Amazon has cracked down on sellers for their predatory pricing practices. The same can happen with businesses and their vendors.
  • Fake Equipment and Goods Schemes – There have already been many reports of people selling COVID-19 kits and masks, claiming that they will prevent the purchaser from becoming infected.

The COVID-19 outbreak is providing fraudsters and criminals with a uniquely global platform that has not been seen on such a large scale previously. Disaster fraud is a common issue, but is usually contained to one area (e.g., Texas and Louisiana post-Hurricane Harvey). It is more important than ever for businesses to ramp up their anti-fraud fight and not let their guards down. Having a proper business continuity and remediation plan in place can help deter fraud and protect your businesses.

About Hubert Klein

Hubert Klein is a Partner and Practice Leader in the Financial Advisory Services Group with technical resources in various litigation actions. He has consulted in complex damages, business valuations and due diligence analysis.

About Amy Fitzgerald

Amy Fitzgerald is a Senior Associate in the Financial Advisory Services providing commercial litigation, financial investigations, intellectual property disputes, martial dissolutions, and business interruptions services.

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