Report: When recession strikes, fraud spikes
Data shows reports made to the FBI's Internet Crime Complaints Center increased by 69.4% from 2019 to 2020.
There were 336,655 complaints of online crime made to the Federal Bureau of Investigations’ Internet Crime Complaints Center at the height of the recession in 2009 – an increase of over 22% from the previous year. The amount of monetary loss from these crimes in 2009 was more than double what was reported in 2008, coming in just shy of $560 million.
When the COVID-19 pandemic struck in 2020, the U.S. encountered another recession. Unemployment peaked at 14.7% and, just as during the 2009 recession, there was a spike in crimes reported to the Internet Crime Complaints Center – 791,790 reports in 2020, up 69.4% from 2019.
A recent report from SEON attributes these internet crime increases, in-part, to a reduced workforce during economic slumps.
When companies cut budgets and lay off employees to save money, they can unintentionally make themselves vulnerable to attack. When staff is reduced, the remaining workers’ duties are often stretched to compensate, which can leave the organization exposed to cyber risks.
The U.K. has experienced similar trends in fraud during times of recession. SEON’s report states during the 2008 recession, GDP in the U.K. decreased by 2.1%, and fraud offenses increased 7.3%. Data from Action Fraud shows the number of fraud reports in the U.K. climbed to 31,322 for the 2021 fiscal year, compared to 27,187 the year prior; and losses from fraud rose by £4.2 million between the 2020 and 2021 fiscal years.
The most common types of online crime, according to Action Fraud, for fiscal year 2021 involved social media and email hacking, though they also saw a surge in phishing messages.
To guard against online fraud, even during times of economic hardship, SEON suggests businesses:
- Strengthen vulnerable departments by providing employees with fraud prevention training.
- Implement strong fraud prevention software.
- Thoroughly check the references of all new staff.
- Have insurance in place that covers crime and fraud-related losses.