Protecting companies from Coronavirus crime and fraud

• United Kingdom

• Financial services disputes and investigations
• Litigation and dispute management

06-04-2020

Protecting companies from Coronavirus crime and fraud

Whilst our communities, including the business community, are pulling together like never before to protect the country and the National Health Service from the Coronavirus outbreak, fraudsters and organised crime gangs are unfortunately seeking to exploit vulnerabilities caused by the crisis.

Fraud and corruption risks have increased to such a serious extent, that over the past few days numerous law enforcement agencies and regulators, including the FCA, Metropolitan Police, Europol, NCA, NECC and City of London Police have issued guidance to help identify and avoid scams.

How to safeguard your business

Companies should first educate themselves about the crime typologies which are likely to occur as a result of the coronavirus pandemic, such as:

• Cyberattacks – As businesses follow Government advice by encouraging employees to work from home, cyber criminals are expected to attack any vulnerabilities in the remote connections between employees and the businesses.
• Fraud - All types of fraud are expected to rise. Phishing scams masquerading as HMRC and offering support to individuals and businesses are already common, but businesses should also be on guard for Spear phishing attacks in which the fraudster impersonates a senior director, such as the CEO and issues an instruction to transfer funds or pay an invoice.

• Counterfeit goods – Europol have already reported that there has been a serious increase in the sales of counterfeit pharmaceutical and medical products, with 34,000 counterfeit surgical masks alone seized by law enforcement authorities worldwide in a seven-day period since 3 March 2020.
• Corruption – Transparency International recently warned that the SARS and Ebola epidemics teach us that levels of corruption will rise as a result of this pandemic. As supply chains are interrupted due to the unprecedented global travel restrictions currently in force, many businesses will have to look outside of their existing supply chain. To avoid creating bribery risks, companies must ensure that they conduct proportionate due diligence and monitoring of all new suppliers.

Once the likely crime typologies are known, companies should consider their own business structure and operations in light of those typologies, to conduct a risk assessment which identifies the business areas, in terms of likelihood and impact, which carry the highest risk of being exploited by criminals.

The existing anti-bribery and fraud prevention controls should be assessed for their effectiveness in preventing and mitigating the highest risk areas of the business, and to determine whether enhancements or additional controls should be implemented.

Companies are also advised to ensure that they have an updated investigation plan ready for immediate action should the worst happen. A good investigation plan will help the company to ensure that any internal investigation which is required within the business is carried out efficiently, effectively, lawfully and to the standards expected by law enforcement.

Finally, companies should always remember that their business is not the only one at risk of coronavirus crime, so they must ensure that they continue to conduct appropriate levels of due diligence when using third parties, investing in or acquiring other companies, or entering joint ventures, to avoid exposing the company to the consequences of the criminal conduct of others, including money laundering offences.