Anticipated Fraud Trends

Fraud schemes are constantly evolving as new trends, global developments, and technology emerge. It is important for companies and individuals to remain informed about new and emerging schemes so that they can best protect their assets. The ACFE Insights article, “Top 5 Fraud Trends of 2024,” by Certified Fraud Examiner, Mason Wilder, identifies the fraud and prevention trends that are most likely to define 2024. The following includes a brief summary of each trend:

Fraud Schemes

Scams Enhanced by Generative AI:

Generative artificial intelligence (AI) is used to create high-quality images, videos, audio, and text. While there are plenty of legitimate uses for this technology, fraudsters are benefiting from its increased accessibility. Fraudsters use deepfakes (AI generated impersonations of individuals) to give instructions or to approve transactions under the disguise of an authorized individual. To prevent this type of fraud, experts recommend treating digital requests for money with skepticism.

A Resurgence of Cryptocurrency and Digital Asset Fraud:

With Bitcoin recently reaching its highest price since late 2021, fraud examiners are warning against increased cryptocurrency and digital asset fraud. Experts note that this type of fraud has historically increased and decreased along with the value of popular cryptocurrencies. Fraudsters take advantage of the irreversibility and pseudonymity of digital asset transactions. To prevent this type of fraud, it is important to never reuse digital wallet passwords. Organizations should also re-assess their anti-fraud controls, and they should use multifactor authentication protocols that do not rely on SMS. Remember that if an investment opportunity seems too good to be true, it probably is.

Fraud Involving AI Service Providers:

According to the article, more that $150 billion has been invested in AI startups since the beginning of 2021. As companies compete for investors and the opportunity to create the next big thing, it is likely that some will cave under pressure. In the past, some companies that failed to measure up resorted to fabricated results and fraudulent practices to keep investors happy. Investors and fraud examiners should consider how intense pressure can act as a catalyst for dishonesty and should act with scrutiny.

Fraud Prevention

Increased Obligations and/or Liabilities for Preventing and Detecting Fraud:

There are multiple recent bills and proposals that are likely to shape the anti-fraud profession this year. The United Kingdom Economic Crime and Corporate Transparency Bill was passed in late 2023 to hold organizations accountable for profiting from fraud committed by their employees. This new bill holds organizations accountable whether or not they were aware of the fraud as it occurred. The International Auditing and Assurance Standards Board (IAASB) created a proposal to increase the responsibilities of professionals to detect fraud in their clients’ financial statements. Furthermore, the Public Company Accounting Oversight Board (PCAOB) also proposed an update to its standards that will strengthen auditors’ responsibilities to detect fraud.

Continued COVID Fraud Enforcement in the U.S.

Many bad actors fraudulently cashed in on COVID benefits meant to help individuals and organizations throughout the pandemic. Thankfully, the U.S. has extended the statute of limitations for fraud related to many benefit programs from 5 to 10 years. This will allow federal law enforcement to investigate more cases and to hold fraudsters accountable for their actions. This will likely prevent future schemes from taking place.

Individuals and organizations must remain vigilant in their financial practices to avoid falling victim to emerging fraud schemes.  Thankfully, while fraud is evolving, so are the professionals that work each day to protect honest people.  Remember, the number one way to detect fraud remains through a tip.  Independent hotlines are a cost-effective mechanism for avoiding much more costly damage.