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 by PwC examines over 7200 respondents from 123 countries.
Overall, 49% of respondents, 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. 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.
This year’s survey revealed a significant increase (+6% to 52%) in the share of economic crime committed by internal actors. There was also a jump in the percentage of those crimes attributed to senior management (from 16% in 2016 to 24% in 2018). However there are regional variations. In Australia (64%), the UK (55%), Canada (58%); Argentina (44%) and the US (48%), most reported crime was committed by external actors.
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 Kristin Rivera, PwC Global Forensics 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.”
These are some of the key findings in the Survey:
– The top three types of crime reported were asset misappropriation (45%), cybercrime (31%) and consumer fraud (29%).
– 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).
Cost of fraud and prevention
According to the PwC´s Survey, 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.
Nearly two thirds (64%) of respondents said losses from the most disruptive frauds they experienced could reach up to $US1 million; 16% said between $US1 million and $US50 million.
42% (+3%) of respondents indicated their companies increased their financial commitment to combating economic crime over the past two years.
Didier Lavion, Principal, Forensic Services, PwC US 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.
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.