The document discusses the results of the 2018 Global Economic Crime and Fraud Survey. Some key findings include:
- South Africa had the highest reported rate of economic crime in the world at 77%, though the global average also increased significantly to 49%.
- The most common types of economic crime experienced were asset misappropriation and accounting fraud. However, fraud committed by consumers was also a major issue, ranking second in South Africa.
- The costs of economic crime go far beyond just the direct financial losses, with many organizations spending as much as 10 times the loss amount on investigations and other responses. This indicates the true cost is much higher than realized.
The document discusses the results of PwC's 2018 Global Economic Crime and Fraud Survey. Some key points:
- 49% of global organizations reported experiencing fraud or economic crime in the last 24 months, up from 36% in 2016. In Luxembourg the rate remained stable at 42%.
- Asset misappropriation, cybercrime, and money laundering were the most commonly reported types of economic crime. Tax fraud emerged as the 4th most common in Luxembourg.
- Risk assessments and proactive fraud prevention measures lag behind reactive spending. Only around half of organizations conducted general fraud risk assessments in the last two years.
Corporate fraud and corruption are growing problems globally according to the document. Some key points:
- Developing countries lost nearly $1 trillion to corruption, tax evasion, and trade misinvoicing in 2011 alone. Over the past decade, these countries lost almost $6 trillion illicitly.
- Fraud affects 70% of companies annually on average, costing 1.4% of revenues. Common fraud types include asset misappropriation, corruption, and financial statement fraud.
- Median fraud losses are $145,000 but 22% of cases result in losses over $1 million. Cases involving collusion or multiple perpetrators tend to be more costly.
- While no country is immune
This document summarizes Transparency International's 2019 Corruption Perceptions Index (CPI). The CPI scores 180 countries on perceived levels of public sector corruption, with 100 being very clean and 0 being highly corrupt. The average global score is 43 out of 100. Two-thirds of countries score below 50. The top scoring countries are New Zealand, Denmark, Finland, Singapore, and Sweden. The lowest scoring countries are Somalia, South Sudan, and Syria. The report finds that reducing the influence of money in politics and promoting inclusive decision-making are essential to curb corruption. Countries with stronger campaign finance regulations and more open consultation processes tend to have lower corruption.
The survey found that over 1 in 4 Tasmanian organizations had experienced fraud in the last 2 years. Fraud was most prevalent in the financial services industry, with 50% of those organizations reporting incidents. The most common types of fraud reported were theft of cash, misappropriation of assets, and cyber attacks. Poor internal controls was cited as the main enabler of fraud. While most fraud incidents involved losses under $5,000, some losses exceeded $200,000. Internal controls, external sources, and internal referrals were the top ways fraud was identified. However, only around half of organizations surveyed had a whistleblower policy in place.
This document discusses the results of a survey on financial crime programs in the Middle East and North Africa region. Some key findings include:
- 46% of respondents indicated a lack of confidence in their financial crime prevention programs.
- Compliance spending is expected to continue increasing over the next two years for 63% of respondents.
- Money laundering remains the top financial crime concern, while awareness of cybercrime is growing.
- Support for anti-bribery/corruption programs remains relatively low compared to other programs like AML and fraud.
The document summarizes the annual crime statistics report from SABRIC, the South African Banking Risk Information Centre. Some key highlights include a decrease in ATM attacks and cash-in-transit robberies, but increases in digital banking fraud, business burglaries, and business robberies. Credit and debit card fraud increased by 20.5% due to growth in online transactions. However, losses from banking apps only increased by 1% despite increased usage, showing banks have robust security measures in place. Collaboration between banks and stakeholders is needed to combat organized financial crime.
This document provides an overview of fraud in nonprofits from a three-part series on nonprofit fraud. It discusses why nonprofits are susceptible to fraud, common types of fraud experienced by nonprofits, and statistics on fraud from the ACFE Report to the Nations. Key findings include that the typical organization loses 5% of annual revenue to fraud, 87% of fraud cases involve asset misappropriation, and nonprofits lack some controls that other sectors have. The document aims to educate nonprofits on fraud risks and prevention.
The document discusses the results of PwC's 2018 Global Economic Crime and Fraud Survey. Some key points:
- 49% of global organizations reported experiencing fraud or economic crime in the last 24 months, up from 36% in 2016. In Luxembourg the rate remained stable at 42%.
- Asset misappropriation, cybercrime, and money laundering were the most commonly reported types of economic crime. Tax fraud emerged as the 4th most common in Luxembourg.
- Risk assessments and proactive fraud prevention measures lag behind reactive spending. Only around half of organizations conducted general fraud risk assessments in the last two years.
Corporate fraud and corruption are growing problems globally according to the document. Some key points:
- Developing countries lost nearly $1 trillion to corruption, tax evasion, and trade misinvoicing in 2011 alone. Over the past decade, these countries lost almost $6 trillion illicitly.
- Fraud affects 70% of companies annually on average, costing 1.4% of revenues. Common fraud types include asset misappropriation, corruption, and financial statement fraud.
- Median fraud losses are $145,000 but 22% of cases result in losses over $1 million. Cases involving collusion or multiple perpetrators tend to be more costly.
- While no country is immune
This document summarizes Transparency International's 2019 Corruption Perceptions Index (CPI). The CPI scores 180 countries on perceived levels of public sector corruption, with 100 being very clean and 0 being highly corrupt. The average global score is 43 out of 100. Two-thirds of countries score below 50. The top scoring countries are New Zealand, Denmark, Finland, Singapore, and Sweden. The lowest scoring countries are Somalia, South Sudan, and Syria. The report finds that reducing the influence of money in politics and promoting inclusive decision-making are essential to curb corruption. Countries with stronger campaign finance regulations and more open consultation processes tend to have lower corruption.
The survey found that over 1 in 4 Tasmanian organizations had experienced fraud in the last 2 years. Fraud was most prevalent in the financial services industry, with 50% of those organizations reporting incidents. The most common types of fraud reported were theft of cash, misappropriation of assets, and cyber attacks. Poor internal controls was cited as the main enabler of fraud. While most fraud incidents involved losses under $5,000, some losses exceeded $200,000. Internal controls, external sources, and internal referrals were the top ways fraud was identified. However, only around half of organizations surveyed had a whistleblower policy in place.
This document discusses the results of a survey on financial crime programs in the Middle East and North Africa region. Some key findings include:
- 46% of respondents indicated a lack of confidence in their financial crime prevention programs.
- Compliance spending is expected to continue increasing over the next two years for 63% of respondents.
- Money laundering remains the top financial crime concern, while awareness of cybercrime is growing.
- Support for anti-bribery/corruption programs remains relatively low compared to other programs like AML and fraud.
The document summarizes the annual crime statistics report from SABRIC, the South African Banking Risk Information Centre. Some key highlights include a decrease in ATM attacks and cash-in-transit robberies, but increases in digital banking fraud, business burglaries, and business robberies. Credit and debit card fraud increased by 20.5% due to growth in online transactions. However, losses from banking apps only increased by 1% despite increased usage, showing banks have robust security measures in place. Collaboration between banks and stakeholders is needed to combat organized financial crime.
This document provides an overview of fraud in nonprofits from a three-part series on nonprofit fraud. It discusses why nonprofits are susceptible to fraud, common types of fraud experienced by nonprofits, and statistics on fraud from the ACFE Report to the Nations. Key findings include that the typical organization loses 5% of annual revenue to fraud, 87% of fraud cases involve asset misappropriation, and nonprofits lack some controls that other sectors have. The document aims to educate nonprofits on fraud risks and prevention.
http://www.transparency.org/cpi2015
Transparency International is a global movement with one vision: a world in which government, business, civil society and the daily lives of people are free of corruption. With more than 100 chapters worldwide and an international secretariat in Berlin, we are leading the fight against corruption to turn this vision into reality.
www.transparency.org
This document summarizes the key findings from a PricewaterhouseCoopers survey on economic crime. Some of the main points include:
1) 37% of respondents reported experiencing economic crime, up from 34% in 2011. The most common types were asset misappropriation, procurement fraud, and bribery/corruption.
2) Regions with the highest reported economic crime were Africa (50%) and North America (41%). Industries like financial services, retail, and communications reported among the highest levels.
3) The costs of economic crime go beyond direct financial losses, including damage to employee morale, reputation, and business relationships. Many respondents reported over $1 million in losses from economic
Findings from India Fraud Survey 2012: Fraud and Corporate Governance - Chang...EY
A report based on a survey conducted to understand the fraud scenario in India. This study aims to understand how businesses have coped with increasing fraud and corruption risk last year, what the emerging fraud risks in the industry are and the measures taken by various organizations to mitigate these risks.
For further information on EY's fraud investigation and dispute services, please visit: http://www.ey.com/IN/en/Services/Assurance/Fraud-Investigation---Dispute-Services
In Part I of our Three-Part Nonprofit Fraud Seminar, you will learn about: Why you need to be educated about fraud in your organization. A few statistics and facts about fraud and nonprofits. Who commits fraud and why. Common types of fraud in nonprofits. Three case studies involving common nonprofits fraud schemes and Important takeaways!
The document is a summary of the 2010 Corruption Perceptions Index published by Transparency International. It finds that nearly three quarters of 178 countries score below five on a scale of ten (very clean) to zero (highly corrupt), indicating a serious global corruption problem. Denmark, New Zealand and Singapore rank as the top three least corrupt countries, while Somalia, Myanmar and Afghanistan rank as the most corrupt. The summary calls for greater transparency and accountability worldwide to address corruption and restore trust, especially in efforts to solve global problems.
This report summarizes findings from 2,690 cases of occupational fraud investigated between 2016-2017 in 125 countries. Key findings include:
- Total losses exceeded $7 billion, with a median loss of $130,000 per case. 22% of cases caused losses over $1 million.
- Asset misappropriation was the most common fraud, while financial statement fraud had the highest median loss of $800,000.
- Tips from employees and management review were the most common detection methods, detecting over half of cases. Organizations with hotlines detected more fraud from tips.
- Small businesses with fewer than 100 employees lost almost twice as much per scheme as larger companies.
- Internal control weaknesses were a
This document summarizes the key findings of the 9th edition of Transparency International's Global Corruption Barometer survey. Some of the main results include:
- Nearly 6 in 10 people thought their government was doing a bad job fighting corruption. Police and elected representatives were seen as the most corrupt public institutions.
- On average, 1 in 4 public service users had to pay a bribe in the past year. The average bribery rate was highest in the Middle East/North Africa and Commonwealth of Independent States.
- Over half of respondents felt ordinary citizens can make a difference in fighting corruption, though views varied significantly by country.
- The document discusses the impacts of COVID-19 on insurance fraud detection. It summarizes the results of a survey of insurance professionals on how the pandemic has affected fraud trends and insurance companies' fraud-fighting efforts.
- Key findings include that over 60% of respondents saw an increased fraud workload due to COVID-19, and the top reported pandemic fraud schemes were staged accidents, procedure billing fraud, and fake home accidents. Nearly two-thirds of insurers increased their focus on digitalization in response.
- Ongoing challenges for insurers in combating fraud effectively include issues with internal data quality, access to external data, and keeping up with changing fraud schemes. Most recognize the benefits of automated fraud detection tools but
»» Chinese president Xi Jinping has embarked on a landmark anti-graft campaign since taking office in 2013, resulting in over 100,000 corruption indictments.
»» The campaign primarily targets state-owned enterprises and government officials rather than private companies. Foreign companies are unlikely to be unfairly targeted but should still exercise caution.
»» Recent legal reforms in China criminalize additional corruption activities and increase penalties, signaling a long-term shift away from tolerance of corruption. However, China's corruption levels according to international metrics have not clearly improved despite the campaign.
The South African gambling industry and its regulation were reviewed by a Gambling Review Commission. The Commission assessed the social and economic impacts of the industry since 1996. Key findings included that gambling participation increases with income, problem gambling has stabilized at 4.8%, and youth gambling is a concern. The regulatory framework was found to have inconsistencies across provinces and regulators struggled to fulfill mandates. Recommendations included continuing the existing regulatory approaches, introducing new limits on certain gambling activities, addressing inconsistencies in regulation, and regulating emerging forms of gambling like online gambling.
This document discusses corruption and its negative impacts. It argues that corruption is stealing and impoverishes people, as leaders in Africa steal over $148 billion annually from their people. It advocates for biblical principles of honesty, integrity, and justice to combat corruption, including electing godly leaders, swift punishment of wrongdoers, and full restitution for victims of crimes. Corruption increases when criminals are not punished quickly, so governments must serve as agents of wrath against evil.
The document provides guidance on developing a comprehensive third-party risk management program. It recommends identifying all third-party relationships, prioritizing them by risk, conducting risk-based due diligence on third parties, taking steps to mitigate any uncovered risks, and monitoring third parties continuously. It emphasizes the importance of having a standardized, automated process across all business units to effectively manage third-party risk.
The document estimates the annual global cost of cybercrime to be between $375 billion and $575 billion. It notes that estimating this cost is challenging due to incomplete data and underreporting of cybercrime incidents. The cost includes direct losses as well as indirect costs like additional security spending and lost productivity. Countries with more IP-intensive economies tend to lose more. While developed countries face higher losses, developing countries are also increasingly at risk as internet access grows. The lack of standardized data means the estimate has significant uncertainty, but the overall impact of cybercrime on the global economy is substantial.
ComplianceOnline PPT Format 2015 Developing an Effective Fraud Risk Managemen...Craig Taggart MBA
This document outlines a training session on developing an effective fraud risk management program. The training discusses identifying fraud risks and influencing factors, analyzing existing risk management frameworks, developing fraud risk management program components, promoting a strong ethical culture, conducting fraud risk assessments, common fraud schemes, and techniques for fraud detection. The agenda includes defining risk appetite and tolerance, qualitative and quantitative risk elements, and managing fraud risk through prevention best practices like knowing employees and internal controls. The goal is to help organizations reduce the risk of fraud occurring and detect and address it when it does.
- The document discusses potential reforms to Canada's 2019 tax act and policies around expanding tax treaties. It provides an agenda covering issues like offshore tax havens, Canada's ranking in taxation and competitiveness globally, and recommendations for reviewing the personal and corporate tax systems. The author advocates closing loopholes in tax havens, streamlining business taxes and regulations, and focusing on innovation and productivity to support competitiveness.
Всемирный обзор экономических преступлений за 2016 годPwC Russia
В рамках подготовки Всемирного обзора экономических преступлений PwC за 2016 год было опрошено более 6 000 участников из 115 стран. Несмотря на незначительное общее снижение количества зарегистрированных экономических преступлений, финансовая стоимость каждого отдельного мошеннического действия увеличивается. Четырнадцать процентов респондентов столкнулись с убытками на сумму более 1 млн долл. США за последние два года.
1) The document discusses the results of a survey of senior executives at multinational companies about their perceptions and experiences doing business in Africa.
2) While many opportunities exist due to Africa's rapid economic growth, over two-thirds of respondents said their companies were not currently doing business there.
3) Respondents identified concerns about corruption, lack of transparency, and unpredictable regulatory processes as barriers preventing greater investment in Africa. Improvements in these areas would increase business involvement.
4) Those with operations in Africa said a better understanding of local business cultures and closer partnerships with legal/financial advisors could help mitigate corruption risks.
Overcoming compliance fatigue - Reinforcing the commitment to ethical growth ...EY
This presentation is based on EY FIDS' 13th Global Fraud Survey. It highlights the state of fraud, bribery and corruption, comprising global as well as India findings.
For further information, please visit: http://www.ey.com/FIDS
Etude PwC "Crime Survey 2014" sur la fraude dans le secteur pharmaceutique (o...PwC France
This document summarizes the key findings of a PwC survey on economic crime in the pharmaceutical and life sciences sector. Some of the main points include:
- Bribery and corruption were the second most commonly reported type of economic crime, with over 30% of respondents reporting incidents. Damage to corporate reputation was seen as the most severe impact.
- Over half of companies have operations in high-risk markets for corruption, and many have adapted strategies like additional due diligence training to address risks.
- Controls are effective at detecting fraud, with over 60% of serious crimes found through corporate monitoring. However, few conduct regular fraud risk assessments.
- Internal perpetrators commit a greater percentage of crimes
http://www.transparency.org/cpi2015
Transparency International is a global movement with one vision: a world in which government, business, civil society and the daily lives of people are free of corruption. With more than 100 chapters worldwide and an international secretariat in Berlin, we are leading the fight against corruption to turn this vision into reality.
www.transparency.org
This document summarizes the key findings from a PricewaterhouseCoopers survey on economic crime. Some of the main points include:
1) 37% of respondents reported experiencing economic crime, up from 34% in 2011. The most common types were asset misappropriation, procurement fraud, and bribery/corruption.
2) Regions with the highest reported economic crime were Africa (50%) and North America (41%). Industries like financial services, retail, and communications reported among the highest levels.
3) The costs of economic crime go beyond direct financial losses, including damage to employee morale, reputation, and business relationships. Many respondents reported over $1 million in losses from economic
Findings from India Fraud Survey 2012: Fraud and Corporate Governance - Chang...EY
A report based on a survey conducted to understand the fraud scenario in India. This study aims to understand how businesses have coped with increasing fraud and corruption risk last year, what the emerging fraud risks in the industry are and the measures taken by various organizations to mitigate these risks.
For further information on EY's fraud investigation and dispute services, please visit: http://www.ey.com/IN/en/Services/Assurance/Fraud-Investigation---Dispute-Services
In Part I of our Three-Part Nonprofit Fraud Seminar, you will learn about: Why you need to be educated about fraud in your organization. A few statistics and facts about fraud and nonprofits. Who commits fraud and why. Common types of fraud in nonprofits. Three case studies involving common nonprofits fraud schemes and Important takeaways!
The document is a summary of the 2010 Corruption Perceptions Index published by Transparency International. It finds that nearly three quarters of 178 countries score below five on a scale of ten (very clean) to zero (highly corrupt), indicating a serious global corruption problem. Denmark, New Zealand and Singapore rank as the top three least corrupt countries, while Somalia, Myanmar and Afghanistan rank as the most corrupt. The summary calls for greater transparency and accountability worldwide to address corruption and restore trust, especially in efforts to solve global problems.
This report summarizes findings from 2,690 cases of occupational fraud investigated between 2016-2017 in 125 countries. Key findings include:
- Total losses exceeded $7 billion, with a median loss of $130,000 per case. 22% of cases caused losses over $1 million.
- Asset misappropriation was the most common fraud, while financial statement fraud had the highest median loss of $800,000.
- Tips from employees and management review were the most common detection methods, detecting over half of cases. Organizations with hotlines detected more fraud from tips.
- Small businesses with fewer than 100 employees lost almost twice as much per scheme as larger companies.
- Internal control weaknesses were a
This document summarizes the key findings of the 9th edition of Transparency International's Global Corruption Barometer survey. Some of the main results include:
- Nearly 6 in 10 people thought their government was doing a bad job fighting corruption. Police and elected representatives were seen as the most corrupt public institutions.
- On average, 1 in 4 public service users had to pay a bribe in the past year. The average bribery rate was highest in the Middle East/North Africa and Commonwealth of Independent States.
- Over half of respondents felt ordinary citizens can make a difference in fighting corruption, though views varied significantly by country.
- The document discusses the impacts of COVID-19 on insurance fraud detection. It summarizes the results of a survey of insurance professionals on how the pandemic has affected fraud trends and insurance companies' fraud-fighting efforts.
- Key findings include that over 60% of respondents saw an increased fraud workload due to COVID-19, and the top reported pandemic fraud schemes were staged accidents, procedure billing fraud, and fake home accidents. Nearly two-thirds of insurers increased their focus on digitalization in response.
- Ongoing challenges for insurers in combating fraud effectively include issues with internal data quality, access to external data, and keeping up with changing fraud schemes. Most recognize the benefits of automated fraud detection tools but
»» Chinese president Xi Jinping has embarked on a landmark anti-graft campaign since taking office in 2013, resulting in over 100,000 corruption indictments.
»» The campaign primarily targets state-owned enterprises and government officials rather than private companies. Foreign companies are unlikely to be unfairly targeted but should still exercise caution.
»» Recent legal reforms in China criminalize additional corruption activities and increase penalties, signaling a long-term shift away from tolerance of corruption. However, China's corruption levels according to international metrics have not clearly improved despite the campaign.
The South African gambling industry and its regulation were reviewed by a Gambling Review Commission. The Commission assessed the social and economic impacts of the industry since 1996. Key findings included that gambling participation increases with income, problem gambling has stabilized at 4.8%, and youth gambling is a concern. The regulatory framework was found to have inconsistencies across provinces and regulators struggled to fulfill mandates. Recommendations included continuing the existing regulatory approaches, introducing new limits on certain gambling activities, addressing inconsistencies in regulation, and regulating emerging forms of gambling like online gambling.
This document discusses corruption and its negative impacts. It argues that corruption is stealing and impoverishes people, as leaders in Africa steal over $148 billion annually from their people. It advocates for biblical principles of honesty, integrity, and justice to combat corruption, including electing godly leaders, swift punishment of wrongdoers, and full restitution for victims of crimes. Corruption increases when criminals are not punished quickly, so governments must serve as agents of wrath against evil.
The document provides guidance on developing a comprehensive third-party risk management program. It recommends identifying all third-party relationships, prioritizing them by risk, conducting risk-based due diligence on third parties, taking steps to mitigate any uncovered risks, and monitoring third parties continuously. It emphasizes the importance of having a standardized, automated process across all business units to effectively manage third-party risk.
The document estimates the annual global cost of cybercrime to be between $375 billion and $575 billion. It notes that estimating this cost is challenging due to incomplete data and underreporting of cybercrime incidents. The cost includes direct losses as well as indirect costs like additional security spending and lost productivity. Countries with more IP-intensive economies tend to lose more. While developed countries face higher losses, developing countries are also increasingly at risk as internet access grows. The lack of standardized data means the estimate has significant uncertainty, but the overall impact of cybercrime on the global economy is substantial.
ComplianceOnline PPT Format 2015 Developing an Effective Fraud Risk Managemen...Craig Taggart MBA
This document outlines a training session on developing an effective fraud risk management program. The training discusses identifying fraud risks and influencing factors, analyzing existing risk management frameworks, developing fraud risk management program components, promoting a strong ethical culture, conducting fraud risk assessments, common fraud schemes, and techniques for fraud detection. The agenda includes defining risk appetite and tolerance, qualitative and quantitative risk elements, and managing fraud risk through prevention best practices like knowing employees and internal controls. The goal is to help organizations reduce the risk of fraud occurring and detect and address it when it does.
- The document discusses potential reforms to Canada's 2019 tax act and policies around expanding tax treaties. It provides an agenda covering issues like offshore tax havens, Canada's ranking in taxation and competitiveness globally, and recommendations for reviewing the personal and corporate tax systems. The author advocates closing loopholes in tax havens, streamlining business taxes and regulations, and focusing on innovation and productivity to support competitiveness.
Всемирный обзор экономических преступлений за 2016 годPwC Russia
В рамках подготовки Всемирного обзора экономических преступлений PwC за 2016 год было опрошено более 6 000 участников из 115 стран. Несмотря на незначительное общее снижение количества зарегистрированных экономических преступлений, финансовая стоимость каждого отдельного мошеннического действия увеличивается. Четырнадцать процентов респондентов столкнулись с убытками на сумму более 1 млн долл. США за последние два года.
1) The document discusses the results of a survey of senior executives at multinational companies about their perceptions and experiences doing business in Africa.
2) While many opportunities exist due to Africa's rapid economic growth, over two-thirds of respondents said their companies were not currently doing business there.
3) Respondents identified concerns about corruption, lack of transparency, and unpredictable regulatory processes as barriers preventing greater investment in Africa. Improvements in these areas would increase business involvement.
4) Those with operations in Africa said a better understanding of local business cultures and closer partnerships with legal/financial advisors could help mitigate corruption risks.
Overcoming compliance fatigue - Reinforcing the commitment to ethical growth ...EY
This presentation is based on EY FIDS' 13th Global Fraud Survey. It highlights the state of fraud, bribery and corruption, comprising global as well as India findings.
For further information, please visit: http://www.ey.com/FIDS
Etude PwC "Crime Survey 2014" sur la fraude dans le secteur pharmaceutique (o...PwC France
This document summarizes the key findings of a PwC survey on economic crime in the pharmaceutical and life sciences sector. Some of the main points include:
- Bribery and corruption were the second most commonly reported type of economic crime, with over 30% of respondents reporting incidents. Damage to corporate reputation was seen as the most severe impact.
- Over half of companies have operations in high-risk markets for corruption, and many have adapted strategies like additional due diligence training to address risks.
- Controls are effective at detecting fraud, with over 60% of serious crimes found through corporate monitoring. However, few conduct regular fraud risk assessments.
- Internal perpetrators commit a greater percentage of crimes
Etude PwC sur la fraude dans le secteur de la distribution et des biens de co...PwC France
http://bit.ly/FraudeRetail
Le secteur de la distribution & des biens de consommation est le secteur le plus touché par la fraude – avec les services financiers –, comme le révèle l’étude du cabinet d’audit et de conseil PwC « Economic Crime Survey 2014 ». 49% des dirigeants interrogés ont déclaré avoir subi une forme de fraude au cours des 24 derniers mois, et ce chiffre ne cesse d’augmenter depuis 2009 (+ 12 points).
Le détournement d’actifs reste la fraude la plus commune dans la distribution (76%), et la corruption est perçue comme le risque le plus important par les entreprises qui se développent à l’international. Mais à l’heure où le secteur de la distribution & des biens de consommation se transforme sous l’influence des nouvelles technologies, une nouvelle menace apparaît, celle de la cybercriminalité.
Management feels increased pressure to deliver growth in challenging market conditions. This pressure, combined with downward pressure on salaries and bonuses, increases the risk of unethical conduct like fraud. The survey found evidence that some companies are engaging in practices like overstating revenues and underreporting costs. While compliance programs have made progress, they may not be as effective as management thinks, and some employees feel such programs harm competitiveness. Businesses must own the problem of fraud risk, ensure compliance is relevant to all employees, and continue asking questions to effectively manage this ongoing challenge.
According to a survey by PwC, 44% of Malaysian businesses surveyed reported being victims of economic crime in the last 12 months, a significant increase from 28% in 2009. The most common crimes were theft, bribery/corruption, and accounting fraud. Additionally, cybercrime is on the rise as one of the top four economic crimes globally, with 23% of global respondents and 5% of Malaysian respondents reporting being victims. To combat increasing economic crimes, the survey recommends that organizations conduct regular fraud risk assessments, install monitoring systems, and foster a culture of cybersecurity awareness.
McGovern & Greene LLP Joins Movement to Shine a Spotlight on Fraud! International Fraud Awareness Week Kicks Off November 15, 2015. Follow us for updates throughout that week consisting of informative videos, infographics, and more!
Corporate Fraud & Corruption Annual Review 2016 - entrevista a Rafael HuamánEY Perú
El Corporate Fraud & Corruption Annual Review 2016 es una publicación de Financier Worldwide, en la que se presentan las opiniones de profesionales líderes alrededor del mundo acerca de las últimas tendencias en fraude corporativo y corrupción.
Esta edición cuenta con una entrevista a Rafael Huamán, Socio Responsable del Área de Anticorrupción y Prevención de Fraude de EY Perú.
Rita Crundwell embezzled over $53 million from 1990-2012 as the comptroller of Dixon, Illinois, a city with an annual budget of $8-9 million. She was able to carry out the fraud due to minimal oversight, a lack of segregation of duties, and by creating fake invoices from the State of Illinois. Her lavish lifestyle and 12 weeks of unused vacation led to the fraud being discovered. She was sentenced to 20 years in prison. Dixon implemented stronger internal controls to prevent future fraud, including segregating duties and requiring multiple approvals for payments and fund transfers.
The document summarizes the key findings of PwC's 2014 Global Economic Crime Survey regarding economic crime in Thailand. Some of the main points include:
- 37% of Thai respondents reported experiencing economic crime directly, higher than global averages. Procurement fraud and bribery/corruption were most common.
- Procurement fraud in Thailand often occurs at the bid process stage through unverified vendors and shell companies. Bribery is also endemic in Thailand.
- Cybercrime awareness is lower in Thailand than global/regional averages, but increasing as threats move outside organizations. Insider fraud makes up 89% of economic crime in Thailand, much higher than global norms.
- Middle managers with 3-5 years'
Fraud and corporate governance changing paradigm in India 2012EY
This report offers a perspective on the bribery landscape across Europe, the Middle East, India and Africa (EMEIA), including enforcement trends, risks for businesses to be aware of and mitigating steps companies may want to consider.
For further information on EY's fraud investigation and dispute services, please visit: http://www.ey.com/IN/en/Services/Assurance/Fraud-Investigation---Dispute-Services
Hiscox DNA of an Entrepreneur report 2016Lucy Hensher
- 66% of firms reported growth in revenue over the past year across all six countries surveyed, though optimism levels for the year ahead declined slightly in most countries.
- Larger firms reported stronger growth, with 85% of the biggest firms (over £10M turnover) reporting increased revenues compared to 61% of the smallest firms (under £100k turnover).
- Hiring remained patchy, with 13% of firms increasing staff but 10% cutting staff. However, 21% of firms plan to increase hiring in the coming year.
- More firms are turning to alternative sources of funding like credit cards and crowdfunding as bank funding remains difficult to access for many smaller companies.
The national anti corruption conference 2014Lwazi L.
The purpose of the National Anti-Corruption Conference 2014 is to lobby for multi-sectoral collaboration and standardisation in the fight against corruption in South Africa. The Conference provides an opportunity for high-level
government and business representatives, as well as civil society, to examine best practices for combating corruption with a particular focus on; promoting transparency and integrity in organising sport and other major events and
establishing cutting-edge measures for governments and business to combat corruption.
The document discusses fraud in nonprofits. It provides an overview of a three-part series on nonprofit fraud, including the types of fraud, why it occurs, detection, and prevention. It notes that asset misappropriation is the most common fraud in nonprofits. The document also summarizes findings from the ACFE Report to the Nations on occupational fraud, including that the typical organization loses 5% of annual revenue to fraud and the median fraud lasts 18 months before detection. It emphasizes that trust alone is not an internal control and that prevention requires controls, education, and oversight.
This document is the 2017 South Africa Risks Report published by the Institute of Risk Management South Africa (IRMSA). It summarizes the results of surveys and workshops with over 1,500 risk professionals to identify and analyze the top risks facing South Africa. The top 3 country-level risks are increasing corruption, water crises, and structurally high unemployment/underemployment. The report also analyzes interconnected risks, how they may evolve over time, their impact on South Africa's National Development Plan, and risk readiness. It includes insights from subject matter experts on the top risks and risk assessment methodology. The report aims to spark risk-related dialogue and increase organizational and national resilience in South Africa.
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2. 2 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
3. 3Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Contents
4 Leading observations
6 Foreword
7 Know what fraud looks like
15 The dawn of proactivity
23 Today's technology as a tool to fight
today's fraud
28 Invest in people, not just machines
4. 4 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
2
1
Detection of economic crime takes on a more proactive
stance
• Organisations taking back control over the detection of
economic crime
• Signs of increased spending being committed to combating
economic crime and fraud
• Environments within organisations more receptive to trusting
internal tip-off processes
• Heightened levels of awareness among the executive suite
correspond with increased levels of accountability exercised by
the jury of public opinion
Rising rates of economic crime continue to disrupt
business
• South African organisations that have experienced economic
crime is now at a staggering 77%!
• Companies today face fraud risk from various avenues –
internal, external, regulatory and reputational
• Senior management taking front stage as a growing threat
from within organisations
• The face of the threat evolves as fraud committed by
consumers comes out of the shadows to rank as second most
reported economic crime
How will you reassure investors when your tone at the top does not correspond with action
from the top?
Is your organisation following the trend of increased awareness or will you be found wanting?
Leading observations
5. 5Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
4
3
True cost of economic crime a cause for great concern
• 19% of organisations have had to spend between twice and
ten times as much on investigations as the original amount
lost to economic crime
• Rightly or wrongly, CEO and board increasingly being held
accountable
• Investment in people seen as an effective antidote to fraud
How do you change your policies from words on paper
to an indication of your organisational culture?
Regulatory risk driving corporate behaviour, but
reputation has become key
• Increased levels of regulatory scrutiny and enforcement seen
globally
• 71% of respondents expect recent geopolitical regulatory
changes to result in changes to enforcement
• Only 37% of respondents have conducted an anti-bribery/
anti-corruption risk assessment
• One in three organisations cite business misconduct as an
emerging threat
How will you fare when judged by the jury of public opinion?
6. 6 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Foreword
Economic crime continues to disrupt
business, with this year’s results showing
a steep incline in reported instances of
economic crime in South Africa – once
again we have the dubious honour of
having the highest levels in the world, at a
staggering 77%!
The global results were equally dismal,
revealing the highest level of reported fraud
and economic crime since this thought
leadership publication was launched in 2001.
We believe that these jumps in reported crime
are being driven by a heightened state of fraud
awareness by respondents, and in this lies the
silver lining. After a long malaise,
organisations, driven perhaps by a vigilant jury
of public opinion, have become wary of not
only the afflictions that may affect them but
also the negative impact of being seen to be
doing nothing. While the tone at the top is still
seen as important, visible action from the top
has become vital to survival.
We have witnessed paradigm shifts in the
manner and style that businesses are being
run:
• Accountability for fraud and economic
crime has moved into the executive suite,
with the C-suite increasingly taking
responsibility, and the fall, when economic
crime and fraud occur.
• Organisations are beginning to shed their
denial complex regarding the many blind
spots they have in identifying fraud and
are learning how to address them.
• Changes to the legal and geopolitical
landscapes are driving greater awareness
and visibility regarding how and why fraud
occurs.
This greater awareness, combined with
heightened scrutiny by, and accompanying
pressure from, the public for organisations to
‘behave’, has created an opportunity for active
responses to be implemented. The need today
is for pre-emptive strikes against a known, yet
elusive enemy, both domestic and foreign.
Fraud risk has been seen to emerge with as
much prominence from within organisations
as it does from outside. We are always on the
lookout for the enemies at the gate, but what
about the enemies already inside? And not just
anyone: often, it’s the ones holding the keys to
the kingdom... The conventional arsenal is no
longer going to cut it, and a more holistic and
collaborative view of your organisation is
necessary.
We hope that this report will help shed light on
those areas that organisations have stopped
seeing and will prompt them to take a closer
look and identify the gaps that exist. Our wish
is for awareness to be further heightened and
for a new dawn to break – the dawn of
proactivity in the fight against economic crime.
Trevor White
Partner, Forensic
Services
PwC South Africa
Global Economic
Crime and Fraud
Survey Leader
7. 7Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Know what fraud
looks like
8. 8 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
How well do South Africans
know the fraud that affects
them?
In this, our sixth instalment of the Global
Economic Crime and Fraud Survey, we
introduced a question asking respondents to
give an indication of their level of insight into
fraud and economic crime in their organisation.
70% of South African respondents indicated
high or extensive knowledge, while the global
response was 60%. This shows that while South
Africa emerged with the highest reported rate
of economic crime, it is apparent that we have
a greater level of awareness of the issues and
challenges we face, in comparison to the rest of
the world.
It is arguably far better to know and have
visibility of issues than to wallow in ignorance,
oblivious of the enemy at the gate – especially
one that is as formidable and damaging as
economic crime and fraud. So now that we know
we have a problem, how aware are we of the
issues we face?
Reported rate of economic
crime
This much is certain: we witnessed an upsurge
in the number of respondents that indicated
that they had been affected by economic
crime over the preceding two years. At 77%,
South Africa’s rate of reported economic crime
remains significantly higher than the global
average rate of 49%. However, this year saw an
unprecedented growth in the global trend, with a
36% period-on-period increase since 2016.
Economic crime in South Africa is now at the
highest level over the past decade. Alarmingly,
we still found that 6% of executives in South
Africa (Africa 5% and Global 7%) simply did
not know whether their respective organisations
were being affected by economic crime or not.
Figure 01: The reported rate of economic crime
0
10
20
30
40
50
60
70
80
90
100
2009
62% 60%
69% 69%
77%
30%
South Africa
34%
37% 36%
49%
2011 2014 2016 2018
Global
Companies today face
a perfect storm of
fraud risk – internal,
external, regulatory
and reputational
Q. Has your organisation experienced any fraud and/or economic crime within the last 24 months?
9. 9Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
South Africa has again reported the highest percentage of economic crime
in the world, with Kenya second and France third. With half of the top ten
countries who reported economic crime coming from Africa, the situation at
home is more than dire.
Figure 02: Top 10 countries reporting most economic crime
While the overall rate of economic crime reported was indeed the
highest for South Africa, the period-on-period rate of increase for South
Africa and Africa as a whole was below that of our American, Asian and
European counterparts. From a regional perspective, the biggest increase
in experiences of economic crime occurred in Latin America, where there
was a 25% increase since 2016 to 53% in respondents who indicated that
they had experienced economic crime. The United States was a close second
with a 17% increase over 2016 to 54% of respondents, while Asia Pacific and
Eastern Europe experienced increases of 16% and 14%, respectively.
Figure 03: The reported rate of economic crime by region
177%1. South Africa
375%2. Kenya
66%5. Uganda
465%6. Zambia
866%4. Russian Federation
271%3. France
7. Belgium 965%
■ ■ 2016 Top 10 RankingReported economic crime in 2018
63%8. China
58%9. Mexico
10. Tanzania 57%
62%57%Africa
46%30%Asia Pacific
35%25%Middle East
54%37%North America
53%28%Latin America
47%33%Eastern Europe
Western Europe 45%
Q. Has your organisation experienced any fraud and/or economic crime within the last 24 months?
Reported economic crime in 2018 Reported economic crime in 2016
40%
Q. Has your organisation experienced any fraud and/or economic crime within the last 24 months?
10. 10 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Types of economic crime
Figure 04: Types of economic crime/fraud experienced
Global 2018 South Africa 2018 South Africa 2016
45%
49%
68%
29%
42%
Tax Fraud
Insider Trading
Competition / Anti-Trust
Law Infringement
Intellectual Property
(IP) theft
Money Laundering
Accounting Fraud
Human Resources Fraud
Cybercrime
Business Conduct/
Misconduct
Bribery and Corruption
Procurement Fraud
Fraud committed
by the consumer
Asset Misappropriation
22%
39%
41%
25%
37%
28%
33%
31%
29%
32%
12%
23%
20%
22%
20%
9%
7%
14%
7%
7%
7%
7%
3%
1%
8%
3%
4%
5%
1%
6%
34%
28%
While asset misappropriation
retained its top spot in the
rankings, every category of
economic crime types showed
diminished instances of occurrence
in comparison to 2016, with two
exceptions: instances of accounting
fraud increased to 22% (2016:
20%) and those of competition/
anti-trust law infringements
increased to 3% (2016: 1%).
Surprisingly, while the instances of
reported cybercrime showed a
small decrease in the South African
context, it retained its second place
in the global rankings, albeit at a
lower rate of occurrence than 2016.
Q. What types of fraud and/ or economic crime has your organisation experienced
within the last 24 months?
11. 11Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Figure 05: Most disruptive economic crimes likely to be experienced over
the next 24 months
MoneyLaundering
HumanResourcesfraud
IntellectualProperty(IP)theft
Competition/Anti-TrustLawInfringement
AccountingFraud
Other
BusinessConduct/Misconduct
AssetMisappropriation
ProcurementFraud
Fraudcommittedbytheconsumer
BriberyandCorruption
Cybercrime
14% 14%
13%
12%
8%
4%
3%
2% 2%
1% 1%
26%
That having been said, more than a quarter
of South African respondents (26%) believe
that cybercrime will be the most disruptive
economic crime to affect their organisations
over the next 24 months.
One of the new entries into the bank of
options for the types of economic crimes
experienced by organisations for the 2018
survey was that of ‘fraud committed by the
consumer’. This category was a consolidation
of frauds traditionally committed by the end-
user, including mortgage fraud, credit card
fraud, claims fraud, cheque fraud, synthetic ID
fraud and the like.
This particular crime, which highlights the
propensity of the ‘man in the street’ to be
a perpetrator of economic crime, makes
one look with new eyes at who the victims
of economic crime are. At second place in
the South African ranking (with 42% of
respondents having experienced this crime)
and third place globally, fraud committed
by the consumer also saw 20% of those
respondents indicating that this fraud was
the most disruptive type of economic crime
experienced, followed closely by procurement
fraud (at 19%). This shows that the entire
supply chain in South Africa is fraught with
criminality. When combined with the high
instances of bribery and corruption reported
(affecting more than a third of organisations
at 34%), the resultant erosion in value from
our country’s gross domestic product (GDP) is
alarming. But the costs of such issues add up
to far more than meets the eye.
Q. Thinking about the next 24 months, which of the following fraud and/or economic crimes is
likely to be the most disruptive/serious in terms of the impact on your organisation (monetary or
otherwise)?
12. 12 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Cost of losses to economic crime and investigations
Figure 06: Financial impact of economic crime
1%
Less than 25,000 US dolllars
25,000 to <50,000 US dolllars
50,000 to <100,000 US dollars
100,000 to <1 million US dollars
1 million to <5 million US dollars
5 million to <50 million US dollars
50 million to <100 million US dollars
100 million US dollars or more
Amount is immeasurable
Don’t know
12%
5%
11%
5%
1%
12%
21%
19%
11%
R
eal cost of crim
e
Up to 10x the Los
s
35% of South African respondents lost more than $100,000 (+/- R1.2 million) to what they regarded
as the most disruptive economic crime to affect them, with 1% reporting losses of greater than $100
million (R1.2 billion). When combined with the costs to address this issue through investigations
or other interventions, where 41% of respondents reported having had to spend an equal or greater
amount (10% reported having to spend upward of three times the amount, with 3% spending as much
as ten times the value of the initial loss), we are faced with the damning realisation that the actual cost
of these crimes is crippling our economy.
Figure 07: Extent of expenditure on investigating or other interventions to address the most
disruptive economic crime/fraud
5%
4%
11%
Don't know
More - approximately ten
times as much or more
More - approximately
five times as much
More - approximately
three times as much
More - approximately
twice as much
The same
Less 50%
22%
9%
43%
17%
15%
3%
3%
9%
7%
4%
3%
11%
Global South Africa
1%
Less than 25,000 US dolllars
25,000 to <50,000 US dolllars
50,000 to <100,000 US dollars
100,000 to <1 million US dollars
1 million to <5 million US dollars
5 million to <50 million US dollars
50 million to <100 million US dollars
100 million US dollars or more
Amount is immeasurable
Don’t know
14%
8%
14%
3%
0%
11%
23%
19%
7%
R
eal cost of crim
e
Up to 10x the Los
s
Global South Africa
Q. In financial terms, approximately, how much do you think your organisation may have directly lost through the most disruptive crime over the last 24 months?
Q. As a result of the
most disruptive crime
experienced in the
last 24 months, was
the amount spent by
your organisation on
investigations and/or
other interventions,
more, less or the
same as that which
was lost through this
crime?
13. 13Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
This adds fuel to the argument that
the costs to proactively implement
preventative measures to counter
fraud, while seeming unpalatable
prior to a fraud occurrence, fade
in comparison to the true cost of
economic crime. These measures are
not only necessary for prevention,
but may be a vital ingredient for
the survival of a business. So ask
yourself – can you really afford to
be reactive to economic crime? Our
findings are rather clear on what the
answer should be!
Fighting the good fight, or a losing battle?
South African companies continue to invest in fighting the challenges
that fraud and economic crime introduce into the business dynamic. 44%
(Africa 41%) of respondents have increased their spend on combating fraud
since 2016 and 46% plan to increase their spend over the next 24 months
(Africa 45%).
This is good news – increased technology and analytics result in stronger
internal controls, which translates into a newfound focus. This is further
fortified by organisations reigniting their whistleblower programmes,
which have in recent years seen a decline. Detection of wrongdoing through
means of tip-offs and whistleblowing mechanisms remained strong this
year, and our survey showed that almost two-thirds (64%) of South
African respondents monitor whistleblower lines as a means to ensure the
effectiveness of their compliance and governance programmes (Africa
51%). This represents a 9% increase since 2016.
What is even more reassuring is that business leaders are taking an active
interest in their governance responsibilities and are becoming aware of, or
rather want to be made aware of, the effects and issues that economic crime
and fraud have on their organisations. 95% of South African respondents
(versus 91% of Global and 94% of African) told us that the most disruptive
incidents of economic crime were brought to the attention of the board
executives or governance leaders within their organisations.
So how were the frauds detected?
Figure 08: Detection of the most disruptive economic crimes/fraud
Corporate
controls
51%
(+7%)
Corporate
culture
30%
(+11%)
Beyond the
influence of
management
19%
(-17%)
Includes
Internal audit (routine) 9%
Fraud risk management (general controls) 18%
Suspicious activity monitoring 11%
Corporate security
(both IT and physical security) 5%
Data Analytics 6%
Rotation of personnel 2%
Includes
Tip-off (internal) 14%
Tip-off (external) 8%
Whistleblowing
hotline 8%
Includes
By accident 8%
By law enforcement 2%
Investigative media 3%
Other detection method 5%
Don't know 1%
Q. How was the incident of the most disruptive fraud and/or economic crime that your organisation
experienced initially detected?
14. 14 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
It is quite uplifting to note that South African organisations have taken
an active stance in assuming control of the detection of fraud, with the
detection of fraud beyond the influence of management having declined
by 17% since 2016.
Our findings indicate a shift in thinking whereby organisations are
making better use of fraud risk management (18% – more than twice the
instances noted in 2016) and data analytics to detect criminal activity.
At the same time, it appears that the environments within organisations
have become more receptive to trusting internal tip-off processes, as
witnessed by the upsurge in the detection of fraud by means of internal
tip-offs (14% compared to 6% in 2016). This is a further feather in the cap
of corporate governance in that employees trust that management will do
the right thing, and society is becoming an active agent of change for both
corporate and public entities alike. This could signify that employees have
finally arrived at the point where illicit activities will not be tolerated, and
are willing to stand up for what is right.
Companies, too, are becoming less inclined to leave the detection of
fraud to chance and have taken a decisive stance to actively combat the
scourge of economic crime. Almost three-quarters (73%) of South African
respondents conducted general fraud risk assessments of their own
volition – a sign that our hypothesis regarding organisational awareness is
sound.
15. 15Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
The dawn of proactivity – get
on board or get left behind
16. 16 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
The need for moving toward proactively
managing fraud risk has been an oft-
repeated mantra of the anti-fraud
community, and our findings of greater
transparency and more committed,
involved leadership in organisations may
point to some hope in this arena.
But the rub of it is that with law enforcement
and regulatory bodies across the globe
increasingly moving toward active (and oft-
times, unforgiving) enforcement, the trend may
very well be a knee-jerk reaction to a desire by
organisations to simply not be found wanting by
the powers that be. Yet this could be a rare case
of the end fully justifying the means.
But if we remain creatures that are compliant
only because we are watched, the fight against
fraud is lacking some vital ingredients, such as
will. This makes for blind spots – lethal kinks in
our armour.
Blind spots – what are we
missing?
It is time for honest organisational introspection
so we can emerge stronger and more effective
in the global fight against economic crime and
fraud.
While no one can deny that the enemy is at the
gates, an interpretation of our results is that
South African organisations are more aware
than their global colleagues of the scourge of
fraud and economic crime. Yet this challenge is
exacerbated by the vulnerability of organisations
to ‘blind spots’ – the cracks found in the overall
awareness or responsibility matrix of even
the most successfully run businesses. These
cracks, which usually only surface after major
incidences, are essentially a manifestation of the
‘not my job’ syndrome and of silo mentalities.
Fraud is defined by Oxford as ‘wrongful or criminal deception intended
to result in financial or personal gain’, but if you were to ask around the
boardroom what fraud means to the individual executives charged with
the responsibility of managing the various moving parts that make up
an organisation, you will get very disparate views. The waters get even
murkier when you start talking about responsibilities. A fragmented idea
of responsibility is what creates the gaps where fraud festers, and this has
devastating effects on the overall effectiveness of your fraud prevention
efforts, regulatory outcomes and, ultimately, your financial performance.
Conversely, in operating in unison and throwing light on those blind spots
lies great opportunity for companies to proactively fill the cracks and deliver
a significant blow to fraud and economic crime.
Levels of detection still being outpaced by
fraud risk
The rules are changing for businesses, profoundly and irreversibly, with
tolerance for corporate and/or personal misbehaviour vanishing. Not only
is public sensitivity about corporate misconduct at an all-time high; in some
cases, corporations and leaders are also being held responsible for past
behaviour, when the ‘unspoken rules’ of doing business might have been
more lax.
PwC's 21st CEO Survey underscores this theme, with chief executives citing
trust and leadership accountability as two of the largest business threats to
growth.
All of this points to a heightened risk of incidents of fraud or economic
crime occurring, and to a need for organisations to take the lead in
preventing it before it can take root.
Since our last survey, we have seen some progress in the number of fraud
detection measures taken by respondent companies. This is a good thing:
not only can a fraud risk assessment help you identify the unique and
specific fraud risks you should be looking for, but these assessments are
increasingly favoured by regulators in enforcement actions.
17. 17Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Still, our survey shows there is significant room
for improvement. Only three in four South
African organisations said they had conducted
any kind of fraud or economic crime risk
assessment. This correlates with the 23% of
organisations that believe they haven’t been
touched by fraud – is this a coincidence?
Shockingly, only around a third (37%) of
respondents had conducted an anti-bribery/anti-
corruption risk assessment. This is an especially
worrisome statistic, considering how impactful
and expensive this crime has become worldwide
on both the regulatory and financial sides.
Regulatory risk continues to
grow
Across the board, regulations and reporting
requirements, touching on both legal and ethical
behaviour, continue to expand. Scrutiny and
enforcement are also on the rise globally, and
cross-border regulatory cooperation is becoming
increasingly routine.
Thirty-six per cent of respondents involved in
the business of money movement or financial
services indicated that they had experienced a
regulatory enforcement or inspection related
to anti-money laundering (AML) in the last two
years.
South Africa is undoubtedly undergoing far-
reaching changes and visible enforcement is
on the rise. 71% of our respondents expect
recent changes in the geopolitical regulatory
environment to have an increasing impact on
their organisations in the next two years, and
63% of them expect more changes as regards the
enforcement of regulations.
83%
of South African CEOs
agree or strongly agree
that organisations are
currently experiencing
increased pressure
to hold individual
leaders accountable
for any organisational
misconduct (compared
to 59% globally) and
71% are concerned
about the lack of trust
in businesses
Source: PwC 2018 21st
CEO Survey
68%
of South African CEOs
measure trust between
their workforce and
their organisation’s
senior leadership
Source: PwC 2018 21st
CEO Survey
And what about acquisitions and
other transactions?
In light of recent events, the risk of ‘buying’
successor liability and bad controls is at an all-
time high. In these cases, a fraud risk assessment
is even more critical as part of pre-deal due
diligence.
Such enhanced due diligence is as critical to the
acquiring company as it is to the private equity
sector, which not only needs to rely on a clean bill
of health on the investment side but would also
need to tout it when selling an asset. Enhanced
fraud, cybercrime and anti-corruption due
diligence will allow acquirers to know what risks
they face and how they can either be carved out
of a deal or remediated post-deal. Furthermore,
the results of both can increase the return on the
sale side.
Meanwhile, many regulators are sharpening
their scrutiny of conduct at the top and rightly so,
given recent events unfolding in both corporate
and government spheres. Whether it’s due
to an increase in awareness or an increase in
misconduct, our survey revealed a significant
bump (4%) in the share of economic crime
committed by internal actors. In particular, there
has been a 5% jump in the percentage of those
crimes attributed to senior management, with
one in five internal crimes now being committed
by the custodians of organisations.
Figure 09: Internal perpetrators of economic crime/fraud
45%
2016
Internal
actor
49%
2018
2009
50%
2011 2014 2016 2018
Senior
management
Middle
management
Junior
management
33%
36%
41%
39%
33%
36%
23%
29%
17%
28% 22% 24%
20%
15%
Q. Who was the main perpetrator of the most disruptive economic crime/fraud?
18. 18 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Fraud takes centre stage
Over the last few years we’ve seen a pronounced shift in the way the world
looks at the perpetual issues of fraud and corruption. Our survey data
reflects this deep undertow of a demand, both public and regulatory, for
accountability, across both the private and public sectors.
This phenomenon is not limited to developed markets. Across vastly
different cultures, in every region of the world, we are seeing signs of
convergence on standards of transparency and expectations of conduct,
driven by both regulators and the public. In nation-states where the rule of
law and transparency have traditionally been weak, we’ve also seen public
outrage displayed in the streets — some politicians and business leaders
have gone to jail, and governments have even been toppled.
For all the drama they bring, these kinds of scandals are not outliers; they’re
leading indicators of a larger trend. The demands for accountability aren’t
stopping at the front door of headquarters. They’ve reached inside the
building, all the way up to the C-suite offices and boardrooms.
Clearly, fraud risk has ‘graduated’ from being an operational issue to
becoming a strategic business challenge that must be managed dynamically
at the very highest level. With a risk landscape this fluid and fast moving,
you can’t rely on yesterday’s profiles and methods to handle your anti-fraud
measures.
20%
of reported internal
frauds were committed
by senior management
Developing nations setting the pace
Our survey shows that 58% of financial services respondents in developing
countries underwent regulatory enforcement and inspections related to anti-
money laundering in the last two years, compared to only 49% in developed
countries.
When it comes to expectations of future anti-fraud investments, 15% of
companies in developing countries expect to significantly increase funding in
the next 24 months. By comparison, only 10% of respondents in developed
countries plan to do so.
19. 19Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
The jury of public opinion: Reputational risk now outstrips
regulatory risk
Based even on fragmentary information, an organisation can find itself being punished from all
corners for its perceived inability to respond appropriately to an issue — well before the board has a
plan on what to do.
That’s because, in the era of radical transparency, companies often don’t get to decide when an issue
becomes a crisis. The jury of public opinion does. As we are currently experiencing in South Africa,
society’s rules change faster than regulators’, and there is little tolerance for those who don’t follow
them.
This year, we introduced a new category of fraud: business misconduct. This refers to fraud or
deception perpetrated by companies upon the market or general public, and includes deceptive
practices associated with the manufacturing, sales, marketing or delivery of a company’s products or
services to its clients, consumers or the general public. The significant number of respondents (33%)
who confirmed that they had suffered just such a type of fraud suggests that this problem is far more
widespread than is apparent from the high-profile business frauds splashed across the headlines.
Survey respondents have consistently ranked employee morale, business relations and reputation/
brand strength among the top three elements that are vulnerable to the negative impacts of economic
crime. These, coincidentally, have a direct effect on public perception from both within and outside
an organisation.
This is not, of course, to minimise regulatory compliance, which, if anything, is more critical than
ever. But consider that regulators, by definition, operate within a limited jurisdiction and under well-
defined rules. A company’s brand/reputation, on the other hand, is subject to no fixed jurisdiction,
law or due process, as has been experienced recently in South Africa – even allegations that are later
found to be incorrect can have negative results, and organisational survival hangs in the balance if
perceptions are not managed appropriately and swiftly.
The desire to contain reputational damage is likely one reason why most companies are choosing to
spend as much or more on investigations and other interventions as the loss experienced from the
crime.
19%
46%
33%
28%
5%
Employee
morale
Business
relations
Reputation/
brand strength
Relations with
regulators
Share
price
Medium to high
Figure 10: Impact of economic crime and fraud on business elements
Q. What was the level of impact of the most disruptive economic crime experienced on the following aspects of your business operations?
20. 20 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
In light of investigating fraud costing up
to ten times as much as the fraud itself,
potentially amounting to millions of Rand –
are we not still being too reactive?
Rightly or wrongly, the CEO
and board are accountable
Our survey underscores that the cost of fraud —
and of its aftermath — is substantial.
When the financial costs of fraud hit the
bottom line, it’s natural for senior management
to be brought to account by the board and
shareholders. Today, that responsibility doesn’t
stop there: it begins there. Chief executives are
increasingly seen as the personal embodiment
of an organisation, expected at all times to have
their finger on the pulse of every facet of its
culture and operations. And when ethical or
compliance breakdowns happen, business leaders
are often held personally responsible — both in
the court of public opinion and, increasingly, by
regulators.
Whatever the merits of such an aggressive
response, the C-suite can hardly claim ignorance
as an excuse. Our survey shows that almost
every serious incident of fraud had been brought
to the attention of senior management (95%).
Furthermore, of the 85% of South African
respondents who indicated their organisation
had a formal business ethics and compliance
programme, 21% said the CEO had primary
responsibility for it. This puts a sharp spotlight
on how the front office is managing the crisis
— and the extent to which they are (or are not)
adjusting their risk profiles accordingly.
Organisations with increased
spending in the fight against
fraud and economic crime
46% 11%
Organisations with plans to
significantly increase such
spend
Figure 11: Current and future spend on fighting economic crime/fraud
Q. How has/ is your organisation adjusting the amount of
funds used to combat fraud and/or economic crime?
21. 21Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Can you really change
society by always playing by
the rules?
Many companies are finding themselves
caught in a tug of war between three business
drivers: the market’s appetite for innovative
disruptors; shareholders’ desire for financial
outperformance; and society’s expectations for
ethical conduct.
The truth is that when businesses misbehave,
investors often tend to look the other way as long
as their investment is not threatened. The C-suite
should be careful not to do the same. We often
see that organisations can easily be lured into a
false sense of security when scenarios appear to
be rosy and when the ‘tone at the top’ appears to
consist of the right words. What really counts is
not the tone at the top, but the action at the top.
The market may love disruptors or outperformers
— but not enough to tolerate bad behaviour.
No matter how much of a stockmarket darling a
company is today, if every aspect of conduct risk
has not been managed carefully and soberly, both
company and leadership could lose much of their
goodwill faster than they acquired it. And South
Africans have witnessed many a house of cards
come tumbling down in recent times.
There is plenty of promise, however, among the
start-up generation. Many of these fast-growing
firms are led by younger entrepreneurs with
an ethical viewpoint entrenched within their
genetic composition. Unburdened by legacy
processes or poorly integrated systems, they are
ideally positioned to embed up-to-date fraud
data analytics from the start — a tremendous
competitive advantage in an era of multiplying
frauds. These fresh-faced firms could help model
a new era of both transparency and profitability.
85%
of South African
respondents indicated
their organisation
had a formal business
ethics and compliance
programme
Market’s appetite
for innovative
disruptors
Shareholders’
desire for financial
outperformance
Societal
expectation of
ethical conduct
Figure 12: A formidable balancing act
22. 22 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
83%
of CEOs report
experiencing no
negative impact on
revenue growth,
when a crisis is well
managed
Source: PwC CEO
Pulse on Crisis 2016
Master the small challenges …
and learn to weather the perfect
storm
Breakdowns and mishaps are unavoidable. Yet the
data suggests that there is plenty of upside to learning
how to leverage small shocks. You could look at them
as a blessing in disguise — an opportunity to test your
systems and make improvements.
Part of the maturing process — for companies as well as
countries — comes from weathering storms. According
to a global study, PwC's CEO Pulse on Crisis 2016, when
a crisis or unplanned event is well managed, 83% of
CEOs report experiencing no negative impact on revenue
growth. Beyond revenue, how the C-suite deals with
what can become a crisis will be the measure by which it
will be judged.
It is natural for a relatively inexperienced company to
have a knee-jerk response to a crisis that blindsides it.
Gradually, however, the company gains the ‘muscle
memory’ that enables it to become more proactive, with
mature ethics and compliance programmes and a battle-
tested front office.
These are the circumstances that can help you stay
above the noise, own the narrative, and emerge
stronger — no matter what the future has in store.
23. 23Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Today's technology as a
tool to fight today's fraud
24. 24 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Fraud detection is not just a
control, it is a vital business
issue
When it comes to fraud, technology can be a
double-edged sword, acting as both a business
threat and a business protector. These areas
traditionally resided at the operational level of
the business, forming its second line of defence.
But technology has become so pervasive across
every business process, including customer-
facing areas, that how you leverage it to combat
fraud — the balance you strike between safety
and overzealousness — is now central to the
customer experience. And that makes it a vital
issue for senior management as well.
Fundamentally, companies are realising that
fraud, regardless of how it manifests, is first
and foremost a business problem which could
seriously hamper the growth agenda. In
response, many have made a strategic shift in
their approach to external fraud, and are making
a business case for robust new investments in
areas such as detection, authentication and
reduction of customer friction*.
*What is customer friction?
When customers get too many false fraud alerts
from a bank or vendor, their first reaction is
generally not one of gratitude for superior
information security – it is annoyance. This is
customer friction. And it is a growing challenge
for organisations as they seek to strike the
right balance between acting on fraud red
flags, and being overzealous in sending alert
communications to their customers.
This is a tight spot to be in — and the margin
for error is not large. On the one hand, you run
the risk of missing a fraudulent transaction
(with the financial and reputational fallout that
follows). On the other, as our survey shows, you
risk alienating (and losing) your customer base:
more than one in five South African respondents
(21%) said they thought their organisation’s use
of technology to combat fraud and/or economic
crime was producing too many false positive
alerts.
21%
of respondents said
they thought their
organisation’s use
of technology to
combat fraud and/or
economic crime was
producing too many
false positives
25. 25Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Adopting fit-for-purpose
tech
On the fraud defence front, organisations
today have available a wealth of innovative and
sophisticated technologies aimed at monitoring,
analysing, learning and predicting human
behaviour. And the data shows they are using
them in varying degrees, depending on sector.
Technology can be prohibitively expensive to buy
and adopt across a large organisation. And the
decision regarding what to purchase, and when,
is a delicate one. Some organisations invest in
emerging or disruptive technologies that they
don’t use optimally. Others jump in too late and
find themselves behind the curve in the struggle
to catch fraud or flag potential trouble spots.
Our survey shows, surprisingly, that companies
in emerging markets, including South Africa,
are actually investing in advanced technologies
such as artificial intelligence at a faster clip
than developed nations — possibly as a way to
catch up in an area where other nations have
already sunk considerable infrastructure cost.
Either way, it’s clear that the use of innovative
technologies to combat fraud is now a worldwide
phenomenon.
The wide reach of technology and the stealthy
growth of fraud are creating a double challenge
for all organisations: finding the sweet spot
between effectiveness and cost, and not getting
outpaced by fraudsters that are also combining
brain and machine power to go on the attack.
Customers aren’t just one
consideration of your business —
they are your business
Your customers are the lifeblood of your business. As business
models continue to evolve through the digital revolution,
many are getting exposed to payment fraud for the first time.
How you handle that fraud will profoundly affect your own
outcomes.
Here are some of the characteristics and
challenges of today’s digital fraud:
New digital products are creating new attack surfaces.
To bring products to market, companies once followed an
established B2B process involving resellers, distributors and
retailers. On today’s innovative B2C digital platforms, there is a
much wider attack surface — and much more room for fraud to
break through.
Industry lines are blurring. In the digital economy we are
witnessing a crossing over of some non-financial services
companies into payment systems. Whereas financial services
traditionally had the most advanced anti-fraud measures and
the legacy knowledge of fraud and money-laundering risk,
some of these relative newcomers to the payment space lack
this experience and know-how, making them, and their third-
party ecosystem, susceptible to both fraud and regulatory risk.
The technical sophistication of external fraudsters
continues to grow. Digital fraud attacks continue to get
more sophisticated, thorough and devastating. Consider how
a single ransomware attack in 2017 crippled Britain’s entire
National Health Service (along with hundreds of thousands of
computers the world over), putting lives at risk. Or how, in a
2016 hack, fraudsters managed to subvert several banks’ SWIFT
accounts — the international money transfer system that all
banks use to move billions of dollars daily among themselves
— stealing nearly US$100 million from the Bangladesh Central
Bank.
You can change your credit card number, but you
can’t change your date of birth. The knowledge-based
authentication tools long used to control fraud are outdated,
but most companies haven’t replaced them yet. When a national
entity suffers a massive breach, what’s stolen isn’t a replaceable
asset such as cash — but unique, deeply personal identity
markers such as date of birth or social security number. Since
this is the very data that’s typically used to verify identity and
prevent fraud, such a breach essentially opens the door for any
fraudster to take over a person’s identity. Unfortunately, many
companies have not yet adopted the new techniques — such as
digital device ID and voice biometrics — that have now become
necessary to protect their customers’ assets.
26. 26 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Cyber attacks: Through a
smashed door or an open
door?
Companies continue to cast a wary eye on
cybercrime, with over a quarter of respondents
not only expecting to experience a cyber attack
in the next two years, but also believing it will
be the most disruptive, impactful crime they
will face. In fact, cyber attacks have become so
inescapable that measuring their occurrences and
impact is becoming less strategically useful than
focusing on the mechanism that the fraudster
used.
While all digital fraud is fraud, not all fraud is
digital. So it can be helpful to delineate the two
different ways one can look at cybercrime as
either digital theft or digital fraud. The crime of
digital theft could include stealing cash, personal
information or intellectual property, and it could
involve extortion and ransomware, or a host of
other crimes. This type of crime can be likened
to the stolen goods as opposed to the smashed
door. Digital fraud, on the other hand, is where
the fraudster penetrates an open door (typically,
but not always, a customer- or employee-facing
access point) and uses the company’s own
business processes to attack it. In many ways,
this is the more malicious type of attack, and to
combat this type of fraud, the organisation must
use digital methods — both as a remedy against,
and as a medicine for treating, the infestation.
Fraud detection moves up to
the first line of defence
Where, traditionally, fraud prevention and
detection would have been the domain of the
organisation’s second line of defence — risk
management, legal, compliance, etc. — today’s
enterprises are increasingly embedding their
newly reinforced fraud prevention measures into
the fabric of their first line of defence.
Our survey results support this: 20% of
respondents in South Africa indicated that the
CEO (who is part of the first line of defence) has
primary responsibility for the organisation’s ethics
and compliance programme, and is therefore
more instrumental in the detection of fraud and
the response to it.
This is likely just the beginning of a significant
shift, where first-line fraud prevention and
detection capabilities continue to mature
and strengthen. As they do, they will enable
the second line of defence to shift to a more
traditional second-line approach — governance
and oversight, and setting risk tolerance,
frameworks and policies.
In a world where the boundaries between
industries, technology and regulatory bodies
continue to blur and where fraudsters are looking
beyond the traditional, highly protected financial
services targets for soft spots where they can ply
their trade, this is an important development.
Executive management:
Identification, assessment and
management of risks through
mitigating actions including internal
controls as an integral part of
delivering “ normal” strategy.
The CEO and his executive are
responsible for management of risk
and is held accountable by the
board.
1st
Risk functions:
The Chief Risk Officer (CRO) through
a dedicated risk function advises the
Executive on the design and
implementation of the most effective
enterprise wide risk framework in
support of the Executive as they
discharge their responsibilities.
The CRO and the risk function are
not responsible for managing risk;
that is management’s job.
2nd
Internal audit:
Internal Audit provide independent
assurance on the adequacy of design
and effectiveness of operation of the
risk management framework.
The Internal Auditor is responsible
for independent assurance and is
accountable to the Audit and Risk
Committee.
3rd
Figure 13: Lines of defence
27. 27Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Non-financial companies may not have the
same regulatory obligations as their financial
services (FS) counterparts, but they too could
find themselves running foul of the law. That’s
because regulators and law enforcement agencies
are now looking beyond the primary impact
of a crime such as, for example, trafficking in
counterfeit goods to examine what illicit activities
the stolen assets went to finance. And, as part
of their remit, they are scrutinising non-FS
companies’ compliance and anti-fraud measures
for signs that they may be, consciously or not,
‘aiding and abetting’ such criminal activities — a
further illustration of the increasingly blurred
boundaries between sectors when it comes to
fraud prevention.
Fraud technology: The
business case
The business case for investment in fraud
technology goes beyond protecting against
reputational, regulatory or financial damage.
It also includes reducing the cost of fraud
prevention through efficiencies, enabling you to
safely build and sell new products and services
on a digital platform; and fine-tuning your fraud
programme to reduce ‘customer friction’—
allowing your good customers to interact more
freely with your platform and your product,
without excessive fraud prevention controls
getting in the way.
Anti-money laundering (AML) obligations: not just for banks
Over one-third (34%) of our survey respondents indicated that their businesses were
involved in money movement. Regardless of whether they are true financial services
companies, one thing is clear: regulators will expect these companies to develop AML
compliance programmes with defined degrees of monitoring and compliance. In fact,
almost two-thirds (59%) of respondents told us they are subject to both international
and local AML regulations, so the net is widening faster than one may think.
28. 28 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Invest in people, not just
machines
29. 29Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
A small investment in people
can pay huge dividends
Technology is clearly a fundamental tool in
the fight against fraud, but it’s not the only
one. It may not even be the most strategic one.
Confronted with the obstinate nature of fraud,
many organisations opt to pour more resources
into technology. Yet when it comes to fighting
fraud (and, in particular, internal fraud)
technology investments invariably reach a point
of diminishing returns.
That’s because fraud is the product of a complex
mix of conditions and motivations, only some
of which can be combated by machines or
processes. The most critical factor — the ‘last
mile’ to a bad decision — is human choice. And
ultimately, focusing on human behaviour offers
the best opportunity for reducing or preventing
it, because, ultimately, machines don’t commit
fraud, people do – they just happen to be using
technology more and more in these endeavours.
When it comes to cutting fraud off at the legs, the
return on investment (ROI) on people initiatives
is likely to far exceed that of another piece of
technology.
Controls and culture:
The fraud triangle
An excellent way to frame the problem of
internal fraud is to use a construct called the
fraud triangle. It is a powerful method for
understanding and measuring the individual
drivers of internal fraud — and an ideal
springboard for focusing on ways to prevent it,
holistically.
The birth of a fraudulent act usually follows the
following trajectory:
It starts with pressure – generally related to an
internal issue. Then, if an opportunity presents
itself, the person will usually wrestle with it
emotionally. The last piece of the puzzle, which
enables them to move from thought to action, is
rationalisation.
Since all three of these drivers must be present
for an act of fraud to occur, all three need to
be addressed individually, in ways that are
appropriate and effective.
Fraud Risk
Incentive/
pressure
Opportunity Rationalisation
17%
47% 15%
1. Pressure
2. Opportunity
3. Rationalisation
Honesty
Criminality
Figure 14: The Fraud Triangle
Q. To what extent did incentive, opportunity and rationalisation contribute to the incident of
fraud/ or economic crime within your organisation committed by internal actors?
30. 30 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
49%
of respondents
indicated that an
internal actor was
responsible for
committing the most
disruptive fraud
The antidote to opportunity:
controls
Of the three sides of the fraud triangle, the
bulk of the effort over the years has gone to
addressing the opportunity to commit fraud
— with 71% of South African respondents
indicating that they expend a high degree of
effort in building up business processes such
as internal controls, which have gotten steadily
more sophisticated. Our survey clearly reflects
the results of this prioritisation, with the relative
share due to opportunity dropping from 72% to
47% in only two years.
Unfortunately, companies are putting
significantly less effort into measures meant to
counteract pressures and rationalisation, with
only 42% of respondents indicating that they
spend a high level of effort promoting ethical
decision-making by individual employees. Here
again, we see the results of these choices: 17%
of respondents ranked incentive/pressure as
the leading factor contributing to the most
disruptive fraud committed by internal actors, a
6% increase from 11% in 2016. Rationalisation
showed a similar trend, with 15% of respondents
indicating that this was the leading motivating
factor to commit fraud (up from the 10%
reported in 2016).
This under-emphasis of culture/ethical measures
points to a potential blind spot and may be one
reason why internal fraud is so resilient. Because
fraud is the result of the intersection of human
choices with system failures, it’s important to be
wary of the false sense of security that internal
controls, even well-designed ones, can bring.
But here’s the problem: almost half (49%) of
respondents indicated that an internal actor was
responsible for committing the most disruptive
fraud. And addressing internally committed
fraud requires more than technology and
processes; it requires a focus on the culture
driving or enabling the internal misbehaviour.
The antidote to pressure:
openness
To embed a process that encompasses the full
spectrum of fraud risk, you have to look beyond
the opportunity/controls nexus, and take both a
wider and deeper look inside.
Corporate-sized frauds are generally connected
to corporate pressures — and the pressure
to commit fraud can arise at any level of the
organisation. At the highest level, such pressure
can include a seemingly altruistic desire to save
the company by hitting key funding targets or
otherwise satisfying external expectations. In the
middle ranks of the organisation, these pressures
can manifest as unrealistic sales expectations,
poorly designed compensation structures,
unreasonable supervisors, or a desire to recoup
or avoid losses.
It is important not to over-emphasise the
importance of financial incentives when
considering what might drive a person to commit
fraud. Generally, the motivation is not money,
but fear and embarrassment — fear to admit to
making a mistake, the need to lie to cover it up,
with the hole deepening at each turn. With this
in mind, examine the pressures and incentives
coming from the top, beyond the expected
financial results: Are they complying with
regulations? Are they consistent with doing the
right thing for customers and people?
Short-term tailored controls can serve as a check
on whether aggressive sales programmes are
leading to fraudulent or illegal behaviour. And a
well-publicised open-door or hotline policy can
help, too — not only as a pressure-release valve,
but also as an early-warning system of potential
problems down the line.
31. 31Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
The antidote to
rationalisation: culture
While pressure and opportunity can be
influenced and controlled by the organisation
(at least to some extent), the element of
rationalisation is the wild card. That’s because
it lives, not on a computer, or in a procedural
manual, but inside the mind of a human being.
The person who decides to commit an act of
fraud against their own employer has reconciled
their planned actions to their own personal
code of ethics, and found a way to excuse (or
rationalise) their intended behaviour. They do so
because they think it won’t hurt anyone, or it’s
‘for a good reason’, or it will be rectified before
anyone finds out, or they won’t get caught.
This is a peculiarity of internal fraud: due to a
lack of proximity, those who commit it often see
it as a victimless crime — they cannot visualise
the face of a human who has been directly
harmed by the action.
So how to handle this, the most mysterious
driver of fraud? We’ve found that the first step
on the ladder is to focus on understanding the
environment that governs employee behaviour.
Using surveys, focus groups and in-depth
interviews, probe it to find your internal culture’s
strengths and weaknesses, and focus on the areas
that are lax or problematic.
Consistent training is also key. If people clearly
understand what constitutes unacceptable
actions — and the consequences of taking such
actions — it will be that much harder for them
to rationalise or justify fraudulent activity.
Unlike our global counterparts, South African
organisations have an inclination toward
investing in training initiatives. In fact, the
percentage of respondents who indicated they
have a formal business ethics and compliance
programme has increased from 80% to 85%
since our 2016 survey. And we found that 71%
of South African companies (compared to 58%
of global respondents) with such a programme
indicated their organisation has specific policies
targeting general fraud.
Another effective solution is to have employees
periodically sign compliance agreements
confirming that they have followed company
protocols. This kind of regular day-of-reckoning
exercise can be a powerful deterrent to the
rationalisation of bad behaviour. It can also serve
as an audit trail if needed.
The problem with internal
controls
One of the consequences of an over-reliance on
technology is the belief that standard internal
controls alone can catch fraud.
But there’s a fundamental flaw in that model:
it is based on the assumption that management
will always behave ethically. In fact, experience
shows that virtually every material internal
fraud is a result of management circumvention
or override of those very controls. And indeed,
our survey reveals that more than half of serious
internal fraud committed was perpetrated by
senior and middle management (53%).
Addressing this fundamental structural problem
requires overlaying your garden-variety controls
with fraud risk controls customised to your
unique business culture. That means creating
controls that actually plan for management
override or collusion in targeted areas.
The first step in this process is to conduct a
fraud risk assessment of your organisation.
Yet, considering how critical this step is in
the fight against fraud, it is surprising that all
organisations have not yet adopted this strategy.
Our survey reveals that over the last two years,
73% of respondents have conducted a general
fraud risk assessment and 62% have assessed
their vulnerability to cyber attacks. But only
around one-third of respondents have performed
risk assessments in the critical areas of anti-
bribery and corruption and a cyber response
plan, with less than a fifth of respondents having
carried out assessments in the area of either
AML or sanctions and export controls. One in
12 respondents has not performed any risk
assessments at all in the past 24 months.
These numbers graphically illustrate the scope
of this blind spot. But if you flip the lens, you
can also read in them a hopeful fact: In the
fight against fraud there is significant untapped
potential.
32. 32 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Lower your ‘fraud floor’: Focus on your
people
The task of allocating both energy and funds to a myriad elements that
can detect and prevent economic crime or fraud is a complex one. Just
as fraud does not happen through the agency of a single factor, but by
a combination, you have to find the right formula of technology and
people measures. Yet many organisations who have focused primarily on
technology resign themselves to the belief that there is nothing more they
can do — that a certain amount of fraud is simply part of the cost of doing
business.
While fraud will always be with us, there are in fact many opportunities
to lower your ‘fraud floor’. When you consider the scale of losses caused
every year by successfully committed acts of internal fraud, an investment
in understanding and evolving your culture may offer a surprisingly high
return, assuming you already have a well-established control environment.
Our survey results clearly suggest that this is where companies should now
redirect some of their effort.
12% 3%
No Don’t know
85% 80%
17%
3%
Q. Do you have a formal business ethics and compliance programme in your organisation?
n 2018 n 2016
Yes
Figure 15: Companies reporting having ethics and compliance programmes
33. 33Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Figure 16: Level of effort in specific areas to combat internal fraud
High
Medium
Low
None
Don’t know
Promotion and verfication
of individual employees
ethical decision-making
Organisational and
external influences
Business processes 71% 21% 5%
42% 37% 16%
48% 35% 11%
Q. What level of effort does your organisation apply to the following categories in order to combat fraud and/or economic crime
internally?
As they do, it is well worth remembering a cardinal rule: Establishing (and demonstrating) a culture
of honesty and openness, from the top down, may be the most critical step you can take in imbuing
honesty and accountability across the organisation — and preventing fraud wherever it may seek to
manifest.
34. 34 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Conclusion
Preparation is key – go on the offensive
against fraud
Beyond offering valuable data on the evolution and current state of fraud
among our nearly 300 respondents from South Africa alone, this year’s
Global Economic Crime and Fraud Survey sheds much-needed light
on some of the most important strategic challenges confronting every
organisation — from compliance, culture and crisis response to new
perspectives on accountability, technology and cybercrime.
Throwing light on your blind spots can also unlock significant
opportunities. It can help you effect positive structural improvements
across the organisation — benefits which can make you stronger and more
strategic in good times and bad. These improvements include moving away
from silo views of functions like compliance, ethics, risk management and
legal, and enabling a culture that is more positive, cohesive and resilient.
The value proposition of an up-to-date fraud programme may be hard to
quantify, which can make it difficult to secure the needed investments.
But consider the opportunity cost — financial, legal, regulatory and
reputational — of not setting up a culture of compliance and transparency.
Recent events have demonstrated that not only has the threat of
economic crime continued to intensify; the rules and expectations of
all your stakeholders — from regulators and the public to social media
and employees — have changed, irrevocably. Today, transparency and
adherence to the rule of law are more critical than they have ever been.
35. 35Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
9%
North
America
17%
Western
Europe
14%
Eastern
Europe
31%
Asia
Pacific
3%
Middle
East
14%
Africa
12%
Latin
America
Participation
by region
7,228
Completed
Surveys
123
Countries
Between
21 June
and
28 September
2017
Surveyed
in
18
Different Languages
A Global Survey
36. 36 Global Economic Crime and Fraud Survey 2018 – 6th South African Edition
Participation statistics
Industry sectors
10%
Consumer
33%
Industrial
18%
Financial Services
5%
Agriculture
23%
Other
55%C-suite
24%Head of
Department or
Business unit
Respondents
73%of respondents in Executive Management,
Finance, Audit, Compliance or Risk
Management
282South African respondents
45%of the survey respondents represented
publicly traded companies
53%of respondents were from multinational
organisations
11%
Government &
State-owned