PricewaterhouseCoopers finds an increase of 125% in reported economic crime since 2003
New Delhi, 5 December 2005– Rising economic crime poses a growing threat to companies, with more than half of organisations in India being victims of one form of fraud or other in the past two years, according to PricewaterhouseCoopers' Economic Crime Survey 2005. The number of companies reporting fraud increased from 24 percent to 54 percent since 2003, a 125 percent increase.
The biennial global survey involved 3,634 companies from 34 countries and was conducted in association with Germany’s Martin-Luther University, Halle-Wittenberg.
Companies in India, on an average, reported suffering five fraud incidents since 2003. Regardless of size, no company or industry, regulated or unregulated, was immune from fraud.
“The Indian organisations are under an illusion of safety, having become complacent, and appear to be satisfied with the existing prevention measures (92% of the respondents). With the increasing complexities of the business today, the fight against fraud is a constant struggle. Organisations must not drop their guard, and constantly develop controls and build on the loyalty of their employees to ensure that, even if it is impossible to eradicate fraud, they do not provide an environment in which it can flourish.” said Deepak Kapoor, executive director, PricewaterhouseCoopers Pvt. Ltd.
While there has been a rise in the reported fraud world wide, the unusual rise in the number of reported incidences in India may be attributed to greater awareness and introduction of new legislations on fraud prevention and detection, which has resulted in organisations reporting more incidents of fraud to demonstrate transparency and better governance.
As per the survey, the rise in economic crime is a cause for concern. Companies may have a false sense of security when it comes to fraud. Despite the growing number of companies reporting fraud, more than 80 percent did not consider it likely that their company will suffer fraud over the next five years.
The survey also showed increases in the various types of fraud that can affect a company, from asset misappropriation, false pretence, to counterfeiting. In particular, there has been a seven time increase in the number of companies reporting financial misrepresentation, and 8% respondents reporting incidence of money laundering in the current survey while in previous survey there were no incidents reported of money laundering.
While almost all respondents have one or more measures of detection and prevention of economic crime, the most common means of detecting fraud was by accident or chance (37%).
A typical fraudster as per the survey was a graduate or post graduate male between 31-50 years of age. Nearly one third of the frauds in the country were perpetrated by insiders, i.e. persons involved in the day to day management of the organization, who had good knowledge of the systems within the organization, and its weakness. In 37 percent of the cases the internal perpetrator was a member of the senior management and in 32 percent cases, from middle management.
Notes to Editors:
Definition of fraud terms used in the PricewaterhouseCoopers Global Economic Crime Survey 2005:
- Economic Crime or Fraud: Generic term used in this survey to denote wrongful or criminal activities to or in an organisation, intended to result in the gain of money or benefits for the perpetrator(s).
- Asset Misappropriation (inc. embezzlement): The theft of company assets (including monetary assets/cash or supplies and equipment) by company directors, others in fiduciary positions or an employee for their own benefit.
- False Pretences (inc. confidence game): The intentional action of a perpetrator to deceive those in fiduciary positions and make a personal or financial gain.
- Financial Misrepresentation: Company accounts are altered or presented in such a way that they do not reflect the true value or financial activities of the company.
- Corruption & Bribery (inc. racketeering and extortion): The unlawful use of an official position to gain an advantage in contravention of duty. This can involve the promise of an economic benefit or other favour, the use of intimidation or blackmail. It can also refer to the acceptance of such inducements.
- Insider Trading (only asked to listed companies): Trading of securities by a person inside a company based on non-public information. Money Laundering: Actions intended to legitimise the proceeds of crime by disguising their true origin.
- Counterfeiting (inc. product piracy and industrial espionage): This includes the illegal copying and/or distribution of fake goods in breach of patent or copyright, and the creation of false currency notes and coins with the intention of passing them off as genuine. It also includes the illegal acquisition of trade secrets or company information.
PricewaterhouseCoopers Global Economic Crime Survey 2005 was conducted on behalf of PricewaterhouseCoopers and the leading criminological scholars at Martin-Luther University, Halle-Wittenberg by TNS-Emnid in Germany. The survey was conducted in 34 countries between May and September 2005. Over 3,634 computer-assisted telephone interviews were conducted with CEOs, CFOs and other executives who claimed responsibility for crime prevention and detection within their respective companies. More than half of the respondents (52 percent) are members of the executive board or company management; 43 percent stated that their main responsibility was in the field of finance. The companies were randomly selected with preference given to the 1,000 largest companies of a country and the target number of respondents for each country was determined according to its GDP.
A full copy of the report can be found at: www.pwc.com/crimesurvey
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