COVID-19 Public Sector briefing...2020/05/21 · Fraud and corruption threat Fraud and corruption...

COVID-19Public Sector briefing

21 May 2020

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KPMG.com.au

Public Sector fraud and corruption mitigation strategies post COVID-19

2© 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.Liability limited by a scheme approved under Professional Standards Legislation.

Public sector fraud and corruption mitigation strategies

Dean MitchellPartner, Forensic

Luke Howman-GilesPartner, Forensic

Phil SandsPartner, Risk Assurance

Guest: Andrew LawrenceAGD: Commonwealth Fraud

Prevention Centre


© 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.Liability limited by a scheme approved under Professional Standards Legislation.

Today’s agenda

Post COVID-19: Public Sector fraud mitigation strategies

Overview of KPMG’s research into fraud and corruption risks during COVID19

Why are we seeing such a spike in the threat profile?

Discussion: How to mitigate these risks as we emerge from Covid-19

Perspectives from the Commonwealth Fraud Prevention Centre?

Questions and discussions


Fraud and corruption risks during COVID19• Research conducted between 15 and 18 April 2020

• Included ASX200 organisations, government departments and large private companies

• Respondents primarily Chief Risk Officers, General Counsel and Chief Audit Executives

• Respondents from each state and a range of industries


COVID era conditions

When three factors co-exist: opportunity, motive and rationalisation then the likelihood of fraud or corruption is high.

COVID-19 has delivered significant spikes in all three resulting in one of the most critical fraud and corruption challenges the market has witnessed.

COVID-19 is delivering an increased fraud and corruption risk:

of executives believed their organisation was vulnerable to fraud taking place in this new working environment.

83%

of executives believe that cyber-enabled fraud and corruption will

rise during COVID-19. 95%


Fraud and corruption threatIssues driving a rise in fraud and corruption risk during the COVID-19 era:


Fraud and corruption threatBiggest threat for organisations:


Fraud and corruption threat

Fraud and corruption risk is increasing dramatically but controls are decreasing:

of executives said that their organisations have had to delay their fraud and corruption prevention programs due to the impacts of COVID-19.

27%

Chart1

1st Qtr

2nd Qtr

Sales

73

27

Sheet1

Sales

1st Qtr73

2nd Qtr27


Fraud and corruption threat

Fraud and corruption risk is increasing dramatically but investigations are inhibited:

of executives said that their ability to conduct investigations into fraud and corruption was inhibited by COVID-19.

42%

Chart1

1st Qtr

2nd Qtr

Sales

58

42

Sheet1

Sales

1st Qtr58

2nd Qtr42


Public sector fraud and corruption mitigation strategies

Guest: Andrew LawrenceAGD: Commonwealth Fraud

Prevention Centre


Commonwealth COVID-19 Counter Fraud Taskforce Established by AGD and the AFP to support Commonwealth agencies mitigate serious and complex fraud against COVID-19 response measures.

Key focus – identifying risks and controls, supporting policy, program and system design, and building the necessary information sharing and intelligence arrangements to detect and disrupt fraud.

The Taskforce will support agencies in their work to:

1. Support policy, program and system design to counter fraud activity

2. Identify fraud risks and controls

3. Develop information sharing and intelligence arrangements across government from the outset to maximise the ability for agencies to prevent, detect and disrupt fraud, and

4. Promote deterrence through consistent strategic messaging about the government’s preparedness to prevent, detect and respond to fraud at this crucial time.



Fraud in emergency and crisis situations

• Fraud risks are magnified – increased motivation, opportunity, rationalisation and capability

• There have been COVID-19 related frauds and scams, both internationally and domestically. Serious and organised crime groups are actively looking to exploit and defraud the current environment and measures put in place to respond to COVID-19.



Perspectives from the CFPC

Vulnerabilities1. Reduced up front checks

• ID requirements

• ID verification

• Eligibility criteria

2. New clients/staff

• Unfamiliar processes

• New transactions

3. Rushed/high volume transactions

• High pressure

Threats1. Organised crime

• Already present in programs

• Transfer existing methods

• Infiltration

2. Opportunists

• Can learn from others

• New transactions

3. Insiders

• Less oversight

Impacts1. Service delivery

• Vulnerable people missing out

• Clients exposed to further fraud

2. Security/society

• Funds further fraud

• Increased reliance on services

3. Industry

• Business advantage for fraud

• Props up unviable business

4. Reputation



Perspectives from the CFPC – What you can do

Measures to mitigate and detect fraud are vital to ensure that stimulus and other supports are effective – and actually make it to those most vulnerable in our community.

• Fraud prevention efforts must take into account the importance of speed in an emergency or crisis situation.

• Agencies can build in longer term assurance mechanisms, actively look for opportunities for disruption and ensure that the transition to longer term payments/supports takes into account the higher risk profile associated with these emergency measures.

• Share information – fraudsters are targeting multiple programs and using common methodologies

• Test controls – testing controls through pressure testing enables vulnerabilities to be identified at both the control and whole of program level. It also can provide assurance on the level of effectiveness of a control



Top 5 : Mitigation strategies for fraud as we emerge from Cv-19

1. Identify the fraud risks

•Apply a COVID-19 lens

•Target new processes

•What processes and controls have changed

•What decisions was the organisation forced to make over the past 2+ months

4. Educate the workforce on threats

Increased risks of:

• Asset misappropriation

• Cyber threats

• Absenteeism, timesheet and payroll fraud

• Supplier fraud

• Fraud on Government stimulus programs

Educate on how to Detect and Respond

3. Remind all parties of integrity standards

•Remind your teams of importance of maintaining integrity standards when working remotely

•Remind suppliers, contractors and partners of Government’s integrity standards

•Communicate to stakeholders the change plan

2. Re-calibrate fraud detection & compliance•Prepare a plan to get back to full compliance

•Look at any automated fraud rules and alerts

•Consider available fraud and compliance resources

•Be aware of the shift from detection measures for emergency payments vs long term services

5. Look at your suppliers

•Are they well positioned to manage their own fraud risks

•Consider risks around vendor account takeovers, provision of substandard materials, their access to premises, assets and sensitive information

•Look back at who was onboarded during period


Questions and discussion

Public Sector fraud and corruption mitigation strategies post COVID-19

KPMG.com.au

© 2020 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The KPMG name and logo are registered trademarks or trademarks of KPMG International.

Liability limited by a scheme approved under Professional Standards Legislation.

The information contained in this document is of a general nature and is not intended to address the objectives, financial situation or needs of any particular individual or entity. It is provided for information purposes only and does not constitute, nor should it be regarded in any manner whatsoever, as advice and is not intended to influence a person in making a decision, including, if applicable, in relation to any financial product or an interest in a financial product. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

To the extent permissible by law, KPMG and its associated entities shall not be liable for any errors, omissions, defects or misrepresentations in the information or for any loss or damage suffered by persons who use or rely on such information (including for reasons of negligence, negligent misstatement or otherwise).

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COVID-19�Public Sector briefingPublic sector fraud and corruption mitigation strategiesPost COVID-19: Public Sector fraud mitigation strategies�Fraud and corruption risks during COVID19COVID era conditionsFraud and corruption threatFraud and corruption threatFraud and corruption threat�Fraud and corruption threat�Public sector fraud and corruption mitigation strategiesCommonwealth COVID-19 Counter Fraud Taskforce Fraud in emergency and crisis situationsPerspectives from the CFPC Perspectives from the CFPC – What you can doTop 5 : Mitigation strategies for fraud as we emerge from Cv-19Public Sector fraud and corruption mitigation strategies post COVID-19 Slide Number 17

COVID-19 Public Sector briefing...2020/05/21 · Fraud and corruption threat Fraud and corruption...

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