11 November 2020

It’s becoming clear the pandemic has brought increased risks of cyber fraud across all sectors. However, with an increasing likelihood of long-term remote working and change in working practices, the threat of fraud for housing associations is set to continue to grow.

Growing risks

In January 2020, shortly before coronavirus and the movement restrictions taking hold, the Regulator of Social Housing published its judgement against Red Kite Community Housing Ltd, as the provider fell victim to a payment diversion cyber fraud worth around £1m.

The concern is, if such a fraud could be committed against a formerly G1-rated provider, prior to the pandemic, the risk of future fraud being perpetrated against the sector – given the current situation – is likely to have increased dramatically. The reasons for this are:

  • Remote working practices – as more people are working from home, the risks surrounding system security and safety can become more complex. There are new things to think about, including new protocols to implement and greater awareness training surrounding the risks required.
  • Looming recession – as widely predicted by many, one of the main economic consequences of the pandemic will be a recession. It is historically proven that fraudulent activity and fraud risks increase significantly throughout a period of recession.

There is increased risk arising from the typical cyber threats such as phishing, CEO fraud, malware and ransomware, which highlight how employees both at home and at an office environment have to be alert to keeping their guard up and maintaining confidentiality.

Managers however need to recognise it’s not as simple as saying what to do and what not to do. We have to take into account the challenges and pressures on employees at this time, for example employees’ partners losing their job may increase financial pressure on your employees at home.

Pressure is well known to be a key factor in the onset of dishonest conduct however pressure can also cause distraction from following basic checks and procedures to prevent fraud.

Regulator recommendations

The Regulator’s judgement recommended that Red Kite Community Housing should take a number of key steps to improve some aspects of its governance procedures to support its continued compliance. These included:

  • A more proactive approach is needed – including the implementation of a more robust control framework and a more detailed review of its processes.
  • Effective communication and continuous training.
  • Leadership has a crucial role in overseeing the whole process and its effectiveness.

The alternative fraud triangle

The traditional fraud triangle suggests that pressure is the key, driving factor of fraud. In this scenario, as people face increased pressure, they will often seek out the opportunity for self-preservation or self-betterment and use the pressures facing them to rationalise their actions.

Leadership however is a subset of the pressure that may lead to fraud, impacting the culture of an organisation to cause employees to be disenchanted and not follow policy policies and procedures.

Alternative fraud triangle

A negative working culture, rife with pressure can hamper team motivation and engagement. That engagement is key to successfully reducing fraud risk.

Leaders need to ensure that any improvements to processes and procedures are reflected in the culture of the organisation, ensuring all team members adhere to these, recognise their importance and are adequately trained to identify the new and evolving risks.

The risk is an employee is disheartened or disenchanted and does not follow the rules. Read our white paper on how we can avoid leading to cause an increase in the risk of fraud.

Prevention is better than cure

In almost all cases, prevention is less costly than recovery after the event has occurred. Having a clear plan in place to deal with any instance of fraud is essential to mitigate losses – acting quickly is critical.

Join Arun at the Audit and Risk 2020 virtual event where he will explore practical best practice for cyber security and also for engaging employees to be your eyes and ears.

Arun Chauhan

Arun Chauhan is Managing Director at Tenet Compliance and litigation. See their work for housing associations at tenetlaw.co.uk/sectors/housing-associations

Arun is the reason Tenet is here. He founded Tenet early in 2016, himself having previously held the role of partner heading up a top 20 national law firm’s commercial fraud team.

Arun is a solicitor specialising in financial crime compliance, investigations and litigation arising from fraud. Arun further qualified as a compliance professional through the International Compliance Association.

Arun’s aim when he established Tenet was to provide national law firm expertise on dealing with fraud and financial crime issues in a more accessible format to clients. This objective has helped Tenet grow rapidly in three years and be recognised in 2019 when shortlisted by Legal Week in their Innovative Mid-size Practice category. As Tenet has evolved, it has resulted in Tenet acting for a range of clients from multi-billion pound turnover corporations to individuals both domestically and internationally. Arun typically represents claimants who have suffered loss to dishonest actions.

When advising companies or not-for profit organisations, Arun principally advises Board members, in-house legal, finance and compliance teams.

Immersed in the counter fraud world, Arun is a solicitor and certified compliance professional specialising in financial crime compliance. He was the first private practice solicitor to obtain the post-graduate diploma qualification in financial crime compliance with the International Compliance Association (their leading qualification on the subject).

Arun regularly speaks on counter-fraud, financial crime compliance and fraud matters having featured on BBC television from 2016 onwards and quoted in the national press ( for example, the Telegraph). Arun often presents on webinars and at conferences, including for the International Compliance Association, RICS, for various accounting bodies and the National Housing Federation. He is also the Deputy Chair and Trustee Director for the Fraud Advisory Panel, a board member of Today Advisory and is a member of the Commercial Fraud Lawyers Association.

The increased risks of cyber fraud for housing associations due to coronavirus