Managing fraud during emergency relief and recovery

In an emergency, it is important that the Government provides immediate support to those in affected communities. This could be additional funding to individuals and community groups, emergency accommodation or the provision of basic supplies. Immediate support will often involve a trade-off between urgent programme delivery and the implementation of robust fraud controls.

As the priority will always be to ensure that services and support reach the people who need them as soon as possible, it can make relief programmes an attractive target for fraudsters. There are many examples of fraudsters exploiting emergency situations to gain access to services or funding which they are not entitled to. Understanding how fraud happens and how to effectively manage it can prevent essential funding from being lost to fraudsters and aid in the recovery of money when fraud does occur.

Preparing for emergency relief and recovery

Emergency relief and recovery is an important function of the New Zealand Government, given the frequency and impact of natural disasters such as floods, droughts, earthquakes and other extreme weather events. Emergency management often involves rapidly designing and implementing relief and recovery measures to help individuals, businesses and communities get back on their feet.

Effective emergency management involves anticipating potential risks before emergencies occur and implementing mitigation strategies to manage and minimise their impact. By addressing fraud risk before an emergency occurs, more effective countermeasures can be developed and implemented.

Planning ahead can help to increase the readiness of an organisation to begin the relief and recovery process. For this reason, emergency management should be thought of as a cyclical process, with as many controls put in place as possible before the emergency arises. This will enable and empower organisations to better manage the associated fraud risks, from the outset of an emergency.

The types of fraud that can arise will depend on the type of emergency. It is important for those developing relief and response policies and processes to recognise where they might be vulnerable. Although the risk of fraud typically increases during an emergency, organisations can still effectively mitigate this risk.

Principles of emergency fraud management

When fraud goes unmanaged, it can have significant negative impacts. This includes reduced resources available to affected communities, increased costs of relief efforts and undermining community confidence in the organisation(s) involved in the response. The following principles offer practical ways to plan for and manage fraud risk in emergency situations.

1. Accept there is an inherently high risk of fraud and that it is very likely to happen.

There is a higher risk of fraud and corruption in emergencies due to several factors.

The Government usually adopts a high-trust approach to deliver support as quickly as possible.
There can be an increased financial flow to an affected area.
Documents that would be relied on for verification could be damaged or unable to be accessed.
People will often be dealing with multiple developing situations so can be focused on other more immediate concerns.
Systems that track or hold valuable information can be disrupted.
Fraudsters can be opportunistic and take advantage of the disruption.

Organisations need to be prepared, look for and address fraud concerns before, during and after an emergency event.

2. Integrate fraud control personnel into the policy and process design.

Involve skilled and experienced fraud personnel to identify, record, manage and report fraud risk. By integrating personnel and training employees, organisations can better anticipate and identify fraudulent actions, reducing the chances of fraud occurring or slipping through unnoticed.

Employee awareness of fraud is a key control in the delivery of emergency relief and recovery funding. Training employees to be aware of fraud and how to report it, as well as ensuring that they receive regular messaging on fraud awareness, can help to improve this key control and increase the likelihood that fraud is deterred and detected.

3. Business and fraud control teams should work together to implement low-friction countermeasures where possible.

Once they understand some of the risks of fraud and corruption, fraud control personnel should actively support the policy and delivery teams and suggest key countermeasures that could reduce fraud risks, while ensuring minimal delay to payments or services.

Low friction fraud countermeasures aim to detect and prevent fraud without creating significant delays or administrative burdens. These measures strike a balance between fraud risk management and maintaining the speed and efficiency of response efforts. These measures, though essential for managing fraud during an emergency response, can be integrated into routine operations, ensuring that they are already in place when an emergency arises.

4. Carry out post-event assurance to look for fraud.

Post-event assurance is where an organisation carries out checks for any instances of fraud that may have occurred during the distribution of relief and recovery funding.

It is important during the planning stages of emergency relief and recovery funding that resources are allocated for post-event assurance activities. Thought should be given to the appropriate level of post-event assurance. Any assurance activity is better than none.

When announcing emergency payments or services, highlighting that there will be checks undertaken after the payments have been made, can act as a deterrent to would-be fraudsters. The insights gained from these assurance activities should also be used to refine existing processes. This can help to reduce incidences of fraud in the event of a future emergency occurring.

5. Be mindful of the shift from emergency payments into longer-term services and revisit the control framework, especially where large sums are invested.

Emergency relief and recovery funding often evolves into longer-term relief efforts. It might include infrastructure rebuild projects, or ongoing support payments to affected individuals.

Longer-term support led by the same organisation or team that led the emergency response creates a risk that short-term processes continue longer than initially intended. This can increase the fraud risk as short-term systems and processes may not have the same level of controls.

Those leading relief efforts should recognise the shift to longer-term service provision and take the opportunity to revisit and assess the associated fraud risks and countermeasures. If the low-friction countermeasures that were appropriate during the initial response are continued without adjustment, fraudsters might exploit these opportunities, which could otherwise be prevented.

Download the full guide

For in-depth information on the principles of fraud control in emergency management, and practical guidance on how to manage fraud risks during an emergency response, download the full guide.

Guide to managing fraud during emergency relief and recovery (PDF 527 KB)