Educational Institutions Increasingly Face Cyber Crime and Fraud
Just like any other industry, including for-profit companies, colleges and universities are increasingly facing exposures when it comes to cyber crime, occupational fraud, and other types of losses. At a recent conference of the Association of Independent Colleges and Universities of Massachusetts (AICUM), the topic of fraud at educational institutions was presented by James Gifas, head of Treasury Solutions at RBS Citizens, a commercial bank holding company. Mr. Gifas explained that internal and external fraud threats (such as cyber crime) “present a complex array of crimes that college and university financial offices are trying to get their heads around.” He went on to discuss some of the risks for college financial offices, including:
- The impact of fraud on an institution’s bottom line: Across industry lines, a typical organization loses 5% to 7% of its revenues to fraud each year, according to the Association of Certified Fraud Examiners, and 40% to 50% of affected organizations do not recover any of their fraud-related losses. With budgets increasingly squeezed, colleges cannot afford these kinds of losses.
- Internal threats – slow detection and negative impact on reputation: Employee fraud, across all businesses, according to the American Bankers Association, represents 60% of all fraud incidents. Mr. Gifas cited one case specifically relevant to educational institutions whereby an employee of a college in New York State defrauded the school of $80,000 a year for ten years until the fraud was detected in 2012. This type of fraud affects the reputation of the school and has a negative impact on prospective students, faculty, donors, and administrative and regulatory bodies.
- Electronic payments on the rise: With an increasing number of college vendors asking to be paid via wire and ACH due to ease-of-use, speed, and greater visibility, the downside of these tools is that bank account information and wire instructions are being exchanged more frequently. This means that it’s critical that the information in these transactions is safeguarded with strict risk management and security protocols that’s adhered to and monitored.
- Checks still a risk in an online payment world: According to Mr. Gifas, although there has been an increase in electronic payments, check fraud is still at the top of the list of targets, just second to credit card fraud. “Today, 70% of business-to-business payments are still made by check, and 85% of organizations experienced actual or attempted check fraud in 2012, according to the Association for Financial Professionals’ latest fraud survey. We’ve seen colleges dealing with everything from fraudsters tampering with real checks to a criminal ring creating forged checks modeled after the real thing.”
Caitlin-Morgan provides insurance coverage and risk management programs to many types of educational facilities including higher education facilities like universities, public schools, private & charter schools and schools for special needs. We can help you secure an insurance program for your clients and put in place a program to help mitigate risk and stem losses. Give us a call at: 877.226.1027.