Increase in fraud as recession looms

The threat of global recession and the current financial turbulence will result in an increase in white-collar crime, coupled with significant changes in how fraudsters operate, according to the Kroll Global Fraud Report.
An increase in full-scale fraud investigations involving legal disputes, regulatory action and prosecution is expected in 2009 as whistle blowing becomes more common, the report says.
While the last few years have been relatively calm in respect to litigation activity, the storm will break; those likely to be affected should start to prepare, the report cautions.
It goes on to note that financial institutions, regulators and law enforcement agencies should:
• expect more claims, new legislation and regulation and increased regulatory and law enforcement scrutiny;
• evaluate existing policies, procedures and internal controls to determine any need for restructuring, revision, elimination or new areas to address; and
• assess the adequacy of resources, including personnel, to deal with likely increase in complaints, inquiries and legal actions.
“Finally, despite all that is coming to light, people will always be vulnerable to false hope schemes,” Nancy Goldstein, associate managing director of business intelligence and investigations for Latin America and the Caribbean, writes in the report. “Financial institutions must therefore fully embrace concepts such as enhanced due diligence, as well as intensify screening of prospective employees, business partners and other third parties with whom they conduct business.”