Global economic crime survey 2007: US supplement

Download 2007 Global economic crime survey: US supplement

Despite heightened regulation and companies' investments in controls, fraud remains a major threat to companies around the world, and the United States is no exception. Economic crime remains a major concern for US companies, according to the PricewaterhouseCoopers (PwC) Global economic crime survey 2007 Economic crime: people, culture and controls.

According to the Survey, 53 percent of US firms reported they were affected by crime in the past two years however only 12 percent of US companies believe they will suffer from economic crime in the next two years.

It appears that US companies have too much confidence that controls implemented pursuant to the Sarbanes-Oxley Act intended to reduce instances of improper financial reporting will have a carryover impact that deters and detects other types of economic crime. While this may be partly true, especially in terms of improving corporate cultural attitudes, it is clearly not a complete solution to the mitigation of the broad spectrum of economic crime.

According to the US findings:

• US losses totalled $223 million over the past two years (mean loss of $2.8 million as compared to a mean loss of $2.2. million reported in 2005)
• Traditionally, economic crime has been male-dominated, however we are seeing a shift in the perpetrators of economic crime (68% were male in 2007 as compared to 79% male in 2005)
• There is a definite increase in crime risk when companies expand abroad and engage in M&A activities -- 100% of US companies surveyed were most concerned about corruption and bribery
• 41% of US companies operating in China believe they will be the victim of IP infringement during the next two years (mean cost of IP infringement in China was estimated at $6.5 million) but almost a quarter of US companies operating there said they didn’t know how to address this issue

Conducted with Germany's Martin-Luther-University Halle-Wittenberg, the PwC Global economic crime survey 2007 interviewed more than 5,400 companies located in 40 countries, including the US. Close to half of all organizations reported falling victim to fraud in the past two years, reporting an average loss of approximately US$2.4 million, a 40 percent increase from two years ago.

With over eight years of data on trends, perceptions and incidents of fraud, PricewaterhouseCoopers' Global economic crime survey 2007 finds that economic crime is intractable because of the many kinds of fraud and the broad range of employees, including senior executives, who commit them. It concludes that companies cannot rely on fraud controls alone to detect and deter economic crime. The answer lies in establishing a corporate culture that supports control efforts and whistle-blowing systems with clear ethical guidelines. Companies need to build loyalty to the organization, give employees the confidence to do the right thing, and put in place clear sanctions for those who commit fraud, regardless of their position in the company.

For more information on the PwC Global economic crime survey 2007 and to download the global and US reports, visit www.pwc.com/crimesurvey .