A much wider awareness and understanding of the range, threat and cost of fraud in business has driven reported economic crime to its highest level recorded, said PwC recently.
Overall, 49% of respondents, said their companies had suffered fraud in the last two years, up from 36% in 2016 while Asia Pacific’s reported rate of economic crime hit 46% in 2018, versus 30% in 2016, according to PwC’s bi-annual Global Economic Crime and Fraud Survey.
This year, PwC said it collected responses from more than 7,200 individuals from 123 countries.
Results indicate that Africa (62% up from 57%), North America (54% up from 37%) and Latin America (53% up from 28%) reported the highest levels of economic crime.
Asset misappropriation (45%) continues to lead in economic crime experienced by organizations in the last 24 months, cybercrime (31%), consumer fraud (29%) and business misconduct (28%) are close behind, PwC said in a statement.
This year’s survey revealed a significant increase (+6% to 52%) in the share of economic crime committed by internal actors, PwC pointed out, adding that there was also a jump in the percentage of those crimes attributed to senior management (from 16% in 2016 to 24% in 2018).
The results underline the greater awareness and understanding of the types of fraud, perpetrators, the role of technology, and fraud’s potential impacts and costs for a business, Kristin Rivera, PwC Global Forensics Leader observed.
“We can’t equate higher levels of reported crime with higher levels of actual crime,” Rivera said. “What the survey is showing us is that there is far more understanding of what fraud is and where it is taking place. It’s particularly true of cybercrime, where there’s a much greater understanding of the issues, investigations, analysis, and greater investment in controls and prevention.”
Despite the progress in understanding and reporting, the fact that just over half (51%) of respondents say they have not, or don’t know if they have experienced fraud in the past two years, suggests blind spots still exist in many organizations, she warned.
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The top three types of crime reported were asset misappropriation (45%), cybercrime (31%) and consumer fraud (29%).
18 countries reported cybercrime to be more disruptive than the global average (15%), including Ireland (39%), Belgium (38%), South Korea (31%), Canada (29%), the UK (25%), and the US (22%) all reporting higher than the global average.
Employee morale, business relations, damage to reputation and brand strength are the top three impacts reported
According to Rivera, cybercrime is likely to be the most disruptive economic crime in the next two years, with respondents saying it is twice as likely as any other fraud to be identified to potentially impact organizations.
“It’s also reflected by a rise in the number of people reporting having a cyber prevention and detection plan in place and fully operational (59%, up from 37% in 2016),” she added.
Cost of fraud and prevention
As awareness, and the profile of fraud and economic crime has risen, so too have investments to combat it, linked also to the direct financial losses reported in the past two years, PwC said. In the coming two years, 51% will maintain investment levels, and 44% will increase them.
Nearly two thirds (64%) of respondents said losses from the most disruptive frauds they experienced could reach up to $US1 million; 16% said between $US1 million and $US50 million, survey results indicate.
Fighting fraud: Corporate culture program, AI, and advanced analytics
With the public’s tolerance for corporate and personal misbehaviour declining, many respondents reported addressing fraud prevention through corporate culture initiatives (via internal or external tip offs or hotlines) through which 27% of frauds were detected, said PwC.
Respondents also report the use of technologies like artificial intelligence (AI) and advanced analytics as part of their efforts to combat and monitor fraud.
The survey shows that companies in emerging markets are currently investing in advanced technologies at a faster rate than their counterparts developed nations: 27% of organizations in developing markets currently use or plan to implement AI to combat fraud, versus 22% in developed markets.
Despite higher levels of understanding and reporting of fraud, 46% of respondents globally said their organizations still have snot conducted any kind of risk assessment for fraud or economic crime.
Additionally, the percentage of respondents who indicated they have a formal business ethics and compliance program has dropped from 82% to 77%.
“While technology has a strong role to play in monitoring and detection, when it comes to blocking that ‘last mile’ to fraud, the returns from people initiatives are likely to far exceed those from investing in another piece of technology,” Rivera advised.