Charities targeted by fraudulent activities during COVID-19

The COVID-19 crisis has reminded us of many things. One is the unlimited kindness and generosity of our donor client community. They’ve stepped up to support countless charities and various non-profit organizations, almost all of which have seen their fundraising efforts directly impaired by the coronavirus pandemic and related social-distancing protocols. That’s the bright side of the story. The darker is that some bad actors have taken advantage of the situation to engage in fraudulent activities targeting those same, highly vulnerable, charitable organizations.

The federal government reports more than 13,500 incidents of COVID-19-related fraud across the economy since the start of the pandemic, claiming nearly 11,800 victims and about $7.2 million in lost funds. We know anecdotally that charities, with only limited budgets to combat everything from cybercrime to phone scams, have been a prime target. In some cases, fraudsters have even been posing as charities to scam unsuspecting donors.

On its COVID-19 fraud page, for example, the Canadian Anti-Fraud Centre reports incidents that include individuals posing as officials from the Red Cross and other well-known charities, offering free medical supplies in return for a donation.

In some cases, thieves are becoming even more sophisticated. Take the recent issue of fraud and theft targeting a Canada Gives grant recipient.

An opportunity to improve systems and procedures

As part of the granting process, we regularly mail printed cheques to charities and non-profits. In this instance we sent a cheque for $10,000 to the administrative office of a charity operating a senior’s home), that was stolen soon after delivery. The organization’s mailbox was emptied only about once every week as staff worked from home due to COVID-19 restrictions. The thieves—knowing that banks only carry out compliance and fraud due diligence on cheques valued at $10,000 or more—changed the amount of the cheque to $9,000 and proceeded to cash it. Because the charity was unaware that the gift was incoming, they had no idea it had been stolen.

When it was cashed, our office accountant immediately noticed something was amiss.

The incident reminds us of the responsibility and opportunity that Canada Gives and other charities have to enhance their security and anti-fraud procedures—especially during the pandemic, when nefarious fraudsters are finding creative new ways to steal from the very organizations that need funding the most. The reason we caught this theft is because we have robust accounting procedures in place. In short, we run our charity as a business, so we reconcile our accounts every day. For that reason alone, the crime was noticed and reported.

An enhanced donor experience

In the end, we reported the issue to the bank, which then required us to change our account details. We added two more levels of anti-fraud cheque security to help avoid a repeat of the incident. We have also begun using digital grant transfers whenever possible to avoid using paper-based cheques. A bad experience has helped us improve our procedures and ensure a better experience for our donor clients and the charities and non-profits they so generously support.

On a positive note, the bank’s loss was covered by its insurance policy. We were also able to make the seniors’ home whole by replacing the $10,000 grant they would have received in the first place. But the incident made us wonder: How many donations have been lost or stolen that were intended for the not-for-profit sector?

It goes without saying that we wholeheartedly empathize with the many charities across Canada that have experienced fraud during COVID-19. It would seem unthinkable that individuals would target our sector during these trying times—and a seniors’ home, no less—but that is the reality. The best advice we can share is that by investing in more robust professional practices such as automated accounting and cybersecurity software, qualified staffing and taking simple steps such as ensuring you collect your organization’s mail on a regular basis, we can all continue to achieve our mandate of providing consistent funding to the charities and programs that need it most.

As unthinkable as it may be, thieves both online and off will continue to prey on our organizations. Preventing fraud and theft is a key part of good stewardship for the NFP sector.

The Canada Gives Team