Incidents of fraud are rising every year, yet an overwhelming majority of Alberta business owners and C-suite executives say they are confident in their ability to prevent it.
The disconnect could be due to a dangerous combination of overconfidence and naiveté when it comes to fraud detection and prevention, according to a new Ipsos survey conducted for national accounting, tax and business consulting firm MNP LLP.
The survey revealed that six in 10 (58%) of Alberta businesses either suspect or know for certain their business has experienced fraud or scams in the last year. Despite the fact that so many recognize it is occurring, an overwhelming majority (eight in 10) say they are confident in their ability to prevent it. Another almost 90 per cent feel at least somewhat equipped to deal with it. Survey respondents were more likely to identify fraud as a serious issue in the wider industry in which they work than in their own place of business.
Most businesses are operating with a false sense of security, warns Calgary-based Greg Draper, former RCMP investigator and current vice president of valuations, forensics and litigation support at Alberta-based MNP.
“This kind of ‘it won’t happen to me’ optimism puts the advantage in the hands of criminals and makes businesses tremendously vulnerable,” says Draper, who leads a national team of specialists in workplace fraud mitigation. “The reality is that no organization is immune from either internal or external fraud.”
The Canadian Anti-Fraud Centre agrees. Last year the federal agency saw a 45 per cent increase in the number of complaints of wire fraud in Alberta. Wire fraud involves electronic communications like email scams and is one of the most common types of fraud experienced by businesses.
“Fraudsters will go to great lengths to assume the identity of company executives or trusted vendors; spoofing company email messages, researching employees who are responsible for money management and using language specific to the company being targeted,” says Lynn Danis, criminal intelligence analyst with the Canadian Anti-Fraud Centre. “Victims range from large corporations to small businesses which is why it is critical all organizations create a proactive security-vigilant culture. Ultimately, fraud prevention falls on the business.”
Draper adds there is a “giant denial” among Alberta businesses when it comes to preventing fraud. Two-thirds of survey respondents describe their business’ attitude to fraud and scams as proactive.
“Oftentimes we see businesses who come to us after they have been compromised but they don’t know how or why it has happened,” says Draper. “They may have had security awareness and fraud training processes in place but sophisticated scammers or even internal employees can find points of vulnerability. They realize they were not as equipped to deal with it after the dollars go out the door.”
Despite the rising occurrence of fraud in Canada, the majority of Alberta businesses say they are about as concerned (52%) or less concerned (10%) about this type of crime than they were two years ago.
“Fraud is a serious threat no matter the size or the industry of the organization. All businesses must take preventative measures utilizing best practices, training and technology. When you consider the financial and reputational risks, it is clearly worth the effort.”