Some 37 per cent of respondents – a three per cent rise since 2011 – say they have been victims of economic crime, according to PwC’s 2014 Global Economic Crime Survey.
And, about 25 per cent say they have been victims of cybercrime, as fraudsters increasingly turn to technology as their main crime tool.
The exact direct loss associated with economic crime is difficult to assess. Among crime victims, a total of 20 per cent place the financial impact of economic crime on their organisation at more than $1 million, and two per cent of victims – representing 30 organisations – put the impact at more than $100 million each.
For the first time this year, the survey measures procurement fraud, reported by nearly 30 per cent of respondents. Procurement fraud is seen as a double threat, victimising businesses both in their acquisition of goods and services and in their efforts to compete for new opportunities.
Respondents also report significant collateral damage in such areas as employee morale, cited by 31 per cent, and in corporate reputation and business relationships, both reported by 17 per cent.
“Like a stubborn virus, economic crime persists despite ongoing efforts to combat it. No organisation of any size anywhere in the world is immune to the impact of fraud and other crimes,” said Steven Skalak, PwC Forensic Services partner and lead editor of the survey. “Those committing economic crime succeed by adapting to shifting global conditions like reliance on technology and the expansion of emerging economies.”
“Even worse than the direct financial impact of economic crime is its threat to a wide range of business systems that are the lifeblood of corporate operations. Economic crime damages internal processes, erodes the integrity of employees and tarnishes reputation,” he added.
Those committing economic crime succeed by adapting to shifting global conditions like reliance on technology and the expansion of emerging economies
Economic crime is a pervasive, global threat. Regionally, economic crime is most prevalent in Africa, where half of respondents say they have been victims, though down from 59 per cent in 2011. It is followed by North America (41 per cent), Eastern Europe (39 per cent), Latin America and Western Europe (each 35 per cent), Asia Pacific (32 per cent) and the Middle East (21 per cent).
Respondents from 65 countries and territories reported that they have experienced economic crime. South African respondents report the highest level: 69 per cent, up from 60 per cent in 2011. Crime is also growing rapidly in the Ukraine, 63 per cent up from 36 per cent three years ago; Russia, 60 per cent v 37 per cent in 2011; and Australia, 57 per cent vs 47 per cent in 2011.
By industry, economic crime is most common in the financial services, retail and consumer and communications sectors. Nearly half of respondents in each sector said they have been crime victims. Financial services organisations are victims of high levels of cybercrime and money laundering, while retail and consumer and communications companies have suffered most from theft. Hospitality and leisure, and government, both 41 per cent, also report high crime levels.
The survey found that 55 per cent of economic crime is discovered through corporate controls such as reporting of suspicious transactions, internal audit or fraud risk management. Whistle-blowing systems or tips-offs uncover about a quarter of reported crimes, and about one-fifth is uncovered by other means such as law enforcement, the media or by accident.
www.pwc.com/economiccrime
Which crimes are the most common?
Theft: 69 per cent
Procurement fraud: 29 per cent
Bribery and corruption: 27 per cent
Cybercrime: 24 per cent
Accounting fraud: 22 per cent
Who commits fraud?
Typically economic crime is committed when three conditions are present: life pressure, opportunity and personal rationalisation for the crime.
According to the survey, 56 per cent of economic crime is committed by someone inside the company, while 40 per cent is external. There are wide variances by industry, however. In financial services, for example, nearly 60 per cent of crime comes from outside the company, while 36 per cent is internal.
Globally, a fifth of economic crime is committed by those in senior management, 42 per cent by middle managers and 34 per cent by junior staff.