What will be the impact of recession on cyber fraud?

By Gaia Lamperti

Following tumultuous economic developments, markets around the world are bracing themselves for a possible recession. With the World Bank downgrading its global growth forecast to 2.9%, many commentators see a global economic downturn as more of an inevitability, rather than a possibility. This unwelcome scenario might affect levels of online fraud, as well as other forms of fraudulent activity and how businesses can best respond to the challenge.

Cybercrime prevention platform SEON released a report on the topic, entitled ‘Global Recession Fraud’, which assesses how economic downturns impact fraud rates and identifies what businesses can do to ensure they’re protected against this threat. Using existing data sets compiled by the Association of Certified Fraud Examiners, as well as the Internet Crime Complaints Center, SEON makes the case that businesses across the globe should now plan for an impending uptick in online fraud attempts, which may begin happening on a larger scale than ever before.

“It’s vital businesses recognize that multiple factors drive fraud attacks, therefore elements outside a global recession can have an impact,” commented PJ Rohall, Head of Fraud Strategy & Education at SEON, speaking on the report. “However, given the correlation between a rise in online fraud and periods of economic downturn, we wanted to investigate how a recession can impact businesses facing digital fraud. Our new report outlines this impact and provides businesses with some key tips to ensure they’re staying safe online.”

The total amount of losses rose by £4.2/$5.05 million between 2019–20 to 2020–21, from £5.4/$6.5 million to £9.6/$11.5 million. Meanwhile, the number of disseminations almost doubled, from 7,394 in 2019–20 to 13,655 in 2020–21, when the Covid-19 recession was at its peak.

“Indeed, there seems to be a link between online crime and periods of economic hardship,” says the report. “While in some cases this could be the result of criminals searching for vulnerable targets, in other cases budget cuts and stress can lead to employees whistleblowing on workplace fraud.”Following past recessions, much of the economy has become digitized. Although it provides some security and decreased costs in the form of eliminating red tape and allowing for automated payments, this digital transformation increases the attack surface, no matter if it’s financial fraud, account takeovers or other schemes the fraudsters attempt.”

As well as establishing the link between periods of economic uncertainty and increases in online fraud, the ‘Global Recession Fraud’ report examines some of the nuances related to fraud during times of economic hardship. Notably, the report details how many smaller businesses often reduce spending on online fraud prevention and cybersecurity during times of recession. Unfortunately, this trend will not go unnoticed by fraudsters, thus further increasing the risk to such businesses in this difficult moment.

Key highlights

• Statistics show that online crime increases during a recession
• In the UK, the 2008 recession caused a 2.1% fall in GDP and resulted in a 7.3% increase in fraud offences
• In the US, at the height of the recession in 2009, the Federal Bureau of Investigations’ Internet Crime Complaints Center received 336,655 complaints of online crime – a 22.3% increase from the previous year
• Monetary losses from digital fraud in 2020 are now 7.5 times higher than in 2009