Recession changing fraud risk exposure

The jailing last month of a gang of international criminals for trying to steal £229m from Japanese bank Sumitomo Mitsui was a graphic illustration how firms are being targeted by sophisticated fraudsters.

A bank insider allowed two computer hackers to install spy software on executives’ computers to record log-ins and passwords that would allow them to transfer large amounts of money out of corporate clients’ accounts.

The fraud was only prevented because a gang member incorrectly filled in some of the electronic transfer forms.

Potential for fraud
As the economic recession continues to deepen, UK firms should look closely at their insurance cover to ensure they are adequately covered against fraud.

While some fraud is extremely complex, other cases may be motivated by hard times.

“We’ve seen an increasing sophistication in the techniques being employed to commit very traditional types of fraud,” says Dean White, a managing director in the Financial and Professional Practice of insurance broker Marsh.

Fraud may come from inside the organization as well as externally—such as well-meaning employees trying to cover up a company’s worsening financial health or staff taking desperate measures when finding it hard to make ends meet in the tough economic climate.

Due diligence
“We encourage everyone to do a bit of due diligence on what insurance cover they have got. There’s been a huge change in exposure due to the recession,” says White who adds that his firm has seen an increase in interest in firms looking to buy standalone fraud policies.

Firms should work with their insurers and brokers to ensure their policies protect them properly. “Is your wording robust enough to recognise all the potential frauds that are now out there?” asks White.

•Date:8th April 2009• Region: UK •Type: Article •Topic: Operational risk
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