- 49% report their company suffering fraud in last two years, up from 36% in 2016.
- The majority of external perpetrators (responsible for 40% of fraud) are “frenemies” of the organisation – agents, shared service providers, vendors and customers.
- 41% have spent at least twice as much as they lost to cybercrime, on investigations and other interventions.
- 64% estimate losses linked to most disruptive frauds at up to $US1m; 16% say between $US1m and $US50m.
- Cybercrime is predicted to be the most disruptive fraud for organisations in the next 24 months
A much wider awareness and understanding of the range,
threat and cost of fraud in business has driven reported economic crime to its highest
level recorded in PwC’s bi-annual survey of business crime.
The Global Economic Crime and Fraud Survey examines
over 7200 respondents from 123 countries including Nigeria.
Overall, 49% of respondents’ globally, said their
companies had suffered fraud in the last two years, up from 36% in 2016.
Regionally Africa (62% up from 57%), North America (54% up from 37%) and Latin
America (53% up from 28%) reported the highest levels of economic crime.
Globally, Asset misappropriation (45%) continues to lead in economic crime experienced by organisations in the last 24 months, cybercrime (31%), consumer fraud (29%) and business misconduct (28%) are close behind.
Nigeria presents a slightly different picture with respondents
indicating that Procurement fraud (38%) is the most prevalent economic crime in
Nigeria in the last 24 months. This is followed by Bribery and Corruption
(33%), Accounting fraud (32%) and Business misconduct at 31%.
The results underline the greater awareness and
understanding of the types of fraud, perpetrators, the role of technology, and
fraud’s potential impacts and costs for a business, comments Cyril Azobu, PwC
Nigeria’s Consulting Leader:
“We
can’t equate higher levels of reported crime with higher levels of actual
crime. What the survey is showing us is that there
is far more understanding of what fraud is and where it is taking place. It’s
particularly true of cybercrime, where there’s a much greater understanding of
the issues, investigations, analysis, and greater investment in controls and
prevention.
“However,
despite the progress in understanding and reporting, the fact that
just over half (51%) of respondents say they have not, or don’t know if they
have experienced fraud in the past two years, suggests blind spots still exist
in many organisations.”
Other key findings include:
- 18 countries reported cybercrime to be more disruptive than the global average (15%), including Ireland (39%), Belgium (38%), South Korea (31%), Canada (29%), the UK (25%), and the US (22%) all reporting higher than the global average.
- Employee morale, business relations, damage to reputation and brand strength are the top three impacts reported.
- Reports of disruption from consumer credit card and financial fraud were higher than the global average (29%) amongst regions including Africa (36%); Eastern Europe (36%); and North America (32%).
- Cybercrime is likely to be the most disruptive economic crime in the next two years, with respondents saying it is twice as likely as any other fraud to be identified to potentially impact organisations. It’s also reflected by a rise in the number of people reporting having a cyber prevention and detection plan in place and fully operational (59%, up from 37% in 2016).
As
awareness, and the profile of fraud and economic crime has risen, so too have
investments to combat it, linked also to the direct financial losses reported in the
past two years.
In the coming two years, 51% will
maintain investment levels, and 44% will increase them.
42%
(+3%) of respondents indicated their companies increased their financial
commitment to combating economic crime over the past two years.
Abiodun Adegboye, Associate Director, Forensic Services,
PwC Nigeria comments;
“The
funds allocated to crime detection and prevention are increasing, and that has
a multiplier effect in terms of understanding and detection of fraud. Put
simply, the impact of fraud is no longer an acceptable cost of business.”
68% of external perpetrators (responsible for 40%
of fraud) are “frenemies” of the organisation – people the organisation works
with, including agents, shared service providers, vendors and customers.
“Fraudsters are more strategic in their goals, and
more sophisticated in their methods,” continues Adegboye. “It’s a big business
in its own right. It is an enterprise that is tech-enabled, innovative, opportunistic
and pervasive – like the biggest competitor you didn’t know you had.”
Respondents
to the survey admitted secondary costs such as investigations and interventions
can increase overall costs. 17% of respondents said they had spent the same amount
again as they had lost on investigations and/or interventions of their most
disruptive fraud and 41% said they spent at least twice as much as they lost to
cybercrime on investigations and other interventions.
Fighting fraud
With the public’s tolerance for corporate and personal
misbehaviour declining, in addition to beefing up their internal
controls, many respondents reported addressing fraud prevention through
corporate culture initiatives (via internal or external tip offs or hotlines) through
which 27% of frauds were detected.
Respondents also reporting using technologies like artificial
intelligence (AI) and advanced analytics as part of their efforts to combat and
monitor fraud. The survey shows that companies in emerging markets are currently
investing in advanced technologies at a faster rate than their counterparts
developed nations: 27% of organisations in developing markets currently use or
plan to implement AI to combat fraud, versus 22% in developed markets.
Despite higher levels of understanding and reporting of fraud, blind
spots still prevail. 46% of respondents globally said their organisation have still
not conducted any kind of risk assessment for fraud or economic crime. Additionally,
the percentage of respondents who indicated they have a formal business ethics
and compliance programme has dropped from 82% to 77%.
“Fraud is the product of a complex mix of
conditions and motivations, only some of which can be tackled by
machines,” comments Cyril Azobu.
“While technology has a strong role
to play in monitoring and detection, when it comes to blocking that ‘last mile’
to fraud, the returns from people initiatives are likely to far exceed those
from investing in another piece of technology.”
“It’s particularly relevant when you consider a
sizable percentage of the ‘external’ perpetrators is made up of third-parties
with whom companies have regular relationships: agents, vendors, shared service
providers, customers and more. Everyone in the business must be vigilant about who it allows in to access its systems and
processes.”
Notes
1. In
PwC’s 21st Annual CEO Survey, 59% of CEOs reported higher levels of pressure
from stakeholders to hold individual leaders to account (59%), including for
misconduct. In the Banking and Capital Market (65%), Healthcare (65%) and
Technology sectors (59%), the profile of leadership accountability was higher
than average. So too were expectations in the US (70%), Brazil (67%), and the
UK (63%).
2. Highest levels of
Fraud: Insurance (62%); Agriculture (59%); the Communications (including
telecoms) sector (59%); Financial Services (58%), Retail and Consumer Goods (56%)
and Real Estate (56%) were amongst those sectors reporting the highest levels
of fraud.
3. Cybercrime: Over two
thirds of cyber-attacks were caused by phishing (33%) and malware (36%). It was
the most common form of fraud in countries including US, Canada, and the UK.
4. 18 countries reported
cybercrime to be more disruptive than the global average (15%): Ireland (39%),
Belgium (38%), Netherlands (33%), South Korea (31%), Canada (29%), Romania
(28%), Italy (26%), UK (25%), Switzerland (23%), France (22%), US (22%),
Luxembourg (21%), Portugal (21%), Sweden (21%), United Arab Emirates (21%),
Australia (20%), Israel (18%), New Zealand (16%)
5. The full report is
available for download here: https://pwc.to/gecs2018