Small businesses eyeing new technologies to cut fraud risk: KPMG survey
March 2, 2023
By Bakers Journal
Toronto — A majority of businesses across Canada experienced some form of fraud over the past year as scammers grew increasingly sophisticated, causing most organizations to look to new and emerging technologies as ways to reduce their risk and fend off potential attacks.
A recent survey of more than 500 small and medium-sized enterprises across Canada found three-quarters of respondents experienced either internal fraud (by an employee) or external fraud (such as credit card fraud, fraudulent cheques, false invoices, or identity fraud by hijacking bank accounts) in the past year.
That’s despite the fact that 87 per cent of businesses said they had a program in place to prevent, detect and respond to fraud. Interestingly, only 38 per cent of businesses ‘strongly agreed’ and 49 per cent ‘somewhat agreed’ with that statement.
“Even though most companies have existing fraud programs in place, many of them are falling short, and clearly, there’s a need for improvement,” said Marilyn Abate, a partner in KPMG in Canada’s Forensic and Financial Crimes practice. “The threat landscape is constantly changing as fraudsters are continually devising ways to bypass and circumvent the prevention controls organizations implement. So even if companies think they have an effective anti-fraud program in place, it won’t be long before it’s cracked by a criminal. Businesses need to stay ahead of the threat.”
The Canadian Anti-Fraud Centre received 90,137 reports of fraud last year, with a reported $530 million in losses, up from $379 million in 2021 and $165 million in 2020.
“Technologies such as artificial intelligence (AI), machine learning and biometrics are effective tools to prevent and detect fraud, even more so when they complement strong fraud risk management frameworks, Abate said. “Companies need these technologies to provide nimble and strong protection to combat an ever-evolving fraud landscape. If they don’t invest in the tools and processes to combat fraud, they could be at risk of significant losses.”
KPMG’s survey found companies overwhelmingly recognize they need to make significant changes to their operating environments to manage their fraud risk, with most (85 per cent) saying they’re actively considering investing in these new technologies.
Fraud detection and response tips
Myriam Duguay, a Partner in Forensics at KPMG in Canada, said having an effective anti-fraud program in place and monitoring third-party risk are two key considerations for preventing and detecting fraud in all sectors. Indeed, KPMG’s survey found just over one-third (35 per cent) ‘strongly agree’ their company proactively manages their business and third-party risk to maintain stakeholder trust, and more than half (52 per cent) ‘somewhat agree’.
Duguay recommends the following to help organizations prevent, detect, and manage fraud:
- Establish, implement, and constantly update an enterprise-wide anti-fraud program including a fraud risk assessment
- Actively and frequently monitor and assess third-party risk
- Set up a whistleblower line/program
- Implement anti-fraud training for staff
- Employ active surveillance and data monitoring – forensic data analytics
- Align fraud, financial crimes, and cybersecurity operations
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