Economic Crime in Kenya

Kenya ranks #1 globally for economic crime

  • 66% of Kenya respondents report incidences of economic crime
  • Kenya ranks highest among 78 countries globally
  • Asset misappropriation is the most common type of economic crime committed, in Kenya and globally
  • Cybercrime originating in Africa is a worrisome trend

Two-thirds of businesses and other organisations in Kenya were victims of economic crime in the last 12 months, according to respondents to PwC’s 2011 Global Economic Crime Survey released today. Overall, 66% of respondents in Kenya said their organisations were victims of economic crime, nearly double the global average of 34% and a 9% point increase since 2009. Kenya recorded the highest level of economic crime among all 78 countries surveyed. It was ranked second-highest in 2009 behind South Africa.

‘Economic crime is a very real concern in Kenya,’ says Alphan Njeru, leader of PwC’s regional public sector group. ‘Our economy is expanding rapidly, but so are economic crimes against businesses, government entities and other organisations. To support ongoing growth, it’s important to focus on preventing these crimes in the first place, strengthening our legal and judicial system and improving awareness of mitigation strategies to help organisations deal with crimes after they happen.’

Theft or asset misappropriation (cited by 73 percent) was the most common type of economic crime reported in Kenya, followed by accounting fraud (38 percent), bribery and corruption (23 percent) and money laundering (13 percent). And nearly a quarter of victims said they were subject to cybercrime—the use of technology as the main element in the economic crime.

Though the direct cost of economic crime to an organisation can be difficult to gauge, 70% of respondents in Kenya reported that the cost of economic crime was less than USD 100,000 (approximately Kshs 10 million). The survey shows that an increasing percentage of organisations in Kenya are experiencing economic crime but the cost of these crimes is not rising as fast.

Most fraud is committed by internal fraudsters, according to 68% of Kenya respondents, primarily junior staff members and middle managers. External fraud was committed most often by agents/intermediaries in Kenya. Suspicious transaction reporting and internal audit emerged as the most effective fraud detection methods, noted by 25 percent and 21 percent of Kenya respondents respectively, but a worrisome 19% did not perform any type of fraud risk assessment over the last 12 months.

‘Rising levels of economic crime could be the result of increased public awareness,’ says Martin Whitehead, the head of PwC’s regional forensics practice. ‘Organisations also may be better equipped to detect fraud but advances in technology and greater access to the internet are exposing them to more opportunities for fraud to be committed—particularly cybercrime.’

The survey of 3,877 respondents from 78 countries is a comprehensive study of economic crime in the business world globally, in Africa and in Kenya. It includes 91 respondents from Kenya and over 150 from other African countries. The survey found that economic crime remains pervasive among organisations of all sizes, in all countries and all industries.

Cybercrime

Cybercrime now ranks as one of the top four economic crimes in Kenya, among Africa respondents and globally. Most respondents in Kenya see the cybercrime threat coming from within Kenya, followed closely by Nigeria. Globally, Africa is seen as one of the main sources of cybercrime threats.

The perception of cybercrime as a predominantly external threat is changing and organisations are now recognising the risk of cybercrime coming from inside as well. Respondents in Kenya said that the Information Technology Department was the most likely source of cybercrime internally. IT was cited by 69% of respondents, followed by Operations (61 percent) and Finance (55 percent).

Only 35 percent of Kenya respondents said that they had the capabilities to investigate cybercrime should it occur and just 24 percent indicated that the overall responsibility for monitoring cybercrime rests with senior executives, indicating that cybercrime is still not viewed as an organisation-wide threat and is still mainly the responsibility of IT departments.

Other survey findings

  • The number of respondents who reported accounting fraud has dropped significantly. In 2009, 63 percent of Kenya respondents reported incidences of accounting fraud whereas in 2011, 38 percent reported the crime. Deficiencies in controls identified during the global economic crisis may have been mitigated since then, contributing to the drop in reported incidences.
  • Bribery and corruption remains an issue especially in government related transactions although the prevalence has remained relatively unchanged in Kenya at 27 percent.
  • Incidences of money laundering have increased among Kenya respondents, from 3 percent to 13 percent from 2009-2011, which suggests a greater awareness of the crime.
  • Most organisations in Kenya (58 percent) believe that they will suffer asset misappropriation fraud in the next 12 months, followed by 44 percent of organisations who anticipate bribery and corruption occurring and 41 percent who expect accounting fraud.