Charity Commission warns charities and public to protect themselves against fraudsters amid pandemic
Howard Lake | 20 October 2020 | News
The Charity Commission is warning trustees and donors to strengthen their defences as it fears the pandemic has created environments that are enabling charity fraud.
As we enter Charity Fraud Awareness Week (19 – 23 October 2020), charities have reported being victims of fraud or cybercrime 645 times since the start of the pandemic in March, amounting to £3.6 million in total losses to charities. The true scale of fraud against charities is believed to be much higher, as fraud is known to be underreported.
The regulator is concerned that remote working and virtual activities and sign-off processes, combined with charities’ tendencies to place goodwill and trust in individuals, may make them especially vulnerable. It says that charities providing services and supporting local communities could be amongst those at risk after earlier reports of criminals using PPE as a lure in scams.
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Analysis of frauds reported to the Commission has found that in some cases fraudsters have preyed on people’s fear and anxieties. In one case, the regulator saw a fraudster using a beneficiary’s story of personal struggle during the pandemic to pressure a charity into making a payment quickly.
The regulator also considers that economic hardship may have increased perpetrators’ temptation to commit fraud, particularly in cases of insider fraud. It has seen cases of charity employees diverting funds into their personal bank accounts and even selling charity equipment for personal gain.
Helen Stephenson CBE, Chief Executive of the Charity Commission said:
“We are seeing evidence that opportunists may be taking advantage of charities during the pandemic and I urge all charities to be extra vigilant against fraud.”
Research by the Commission has found that nearly three quarters (73%) of charities affected by fraud go on to change their procedures or enhance internal controls to avoid future frauds. The same survey also found that two thirds of frauds are picked up by financial controls or audit, so the regulator says that some simple checks and controls, together with a strong counter-fraud culture, can be key to disarming fraudsters.
Charities can find free tools and advice via an online hub as part of Charity Fraud Awareness Week, and are urged to follow the regulator’s three top tips in the fight against fraud:
1. Be fraud aware
- All organisations are at risk from fraud. Being a charity is no defence
- Be vigilant: in order to fight fraud, you need to find fraud
- Be sure your trustees, staff and volunteers know how to spot and report fraud
2. Take time to check
- Ensure your charity has robust financial controls in place and knows how to enforce them
- Is there a counter-fraud policy that staff and volunteers are signed up to?
- Trust is exploited by fraudsters – be willing to challenge unusual activity and behaviour, whoever is involved
3. Keep your charity safe
- Prevention really is better than cure: taking simple steps now will help protect your charity from harm
- Building a strong counter-fraud culture is vital and will boost your charity’s defences
- Help is available: seek professional advice if you need to
Some charities may not even know they have been defrauded
Helen Stephenson added: “Sadly the figures we’re seeing are likely to just be the tip of the iceberg. We know that fraud is under-reported and I worry that the pandemic may have intensified that. Charities working remotely may be slower to discover fraud in their new environments. We cannot fight fraud if we cannot find it, so I’d urge anyone involved in charities to speak out if they see anything suspicious.”
“Check before you give”
The regulator also fears that the public’s generosity could be abused before cash reaches charities. Action Fraud has received reports of a scam email purporting to be from HM Government asking for donations to the NHS during the COVID-19 outbreak.
Anyone wanting to support NHS charities can search for charities via the new register of charities and should always check for a registered charity number before giving.
The Commission has published advice for the public on how to ensure they are giving safely to registered charities.
Pauline Smith, Head of Action Fraud, said:
“It’s a sad reality but unfortunately criminals will try to abuse the generosity of others for their own gain. This can have a huge financial impact on charities and the good causes they support. We would encourage people not to be put off donating to charities, but instead to be vigilant and make sure you do your research to ensure you are giving your money to a legitimate organisation. Don’t let your donation end up in a criminal’s pocket.”
If you think you’ve been the victim of a fraud, report it to Action Fraud online at actionfraud.police.uk or by calling 0300 123 2040.
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About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.