By Maximilian Clarke
Austerity is driving a surge in economic crime, together contributing to ‘an altogether more difficult and risky’ business environment, PwC’s latest global economic crime survey (GECS) of 3877 representatives of organisations in 78 countries, suggests.
Over half of the UK respondents to the GECS, the most comprehensive study of economic crime in the business world, reported at least one instance of economic crime in the last 12 months, compared with the global figure of 34%. Perhaps more worryingly nearly a quarter of UK respondents said they’d experienced more than 10 incidents of economic crime during the year.
Cybercrime has become the third most common type of economic crime in the UK, while levels of ‘conventional’ economic crime have fallen (e.g. asset misappropriation fell by eight percentage points compared with our last survey in 2009, and those reporting accounting fraud by 5%).
“The fact that 26% of those who experienced an economic crime in the last 12 months reported a cybercrime is particularly alarming,” said Tony Parton, forensics partner, PwC. “This is a dramatic finding and marks the promotion of cybercrime to the premier league of fraud. As well as direct financial costs, there are other commercial consequences of cybercrime, such as reputational/brand damage, poor employee morale or service disruption.”
The majority of UK respondents saw fraud coming from outside their organisation, yet over a third found their own employees were responsible for the largest frauds, showing a change in sentiment from the 2009 survey, and also differing from the global response, which indicated more internal than external fraud.
“During a downturn, the ‘corporate core’ of an organisation tends to be hit the hardest, with severe resource cutbacks in areas that are the first and second line defences against fraud, like internal audit,” added Parton. “Under-staffing and increased workloads might mean that internal fraud’s going undetected, or that those completing our survey aren’t finding out about it. “
Who are the fraudsters?
The typical fraudster committing an internal fraud in the UK is most likely to be: male, aged between 31 and 40, educated to below degree level and having worked for three to five years in the organisation. The global and UK profiles in 2011 are very similar. The main difference is that the UK fraudster is likely to be less educated: global fraudsters are likely to have at least a first degree.
Respondents in the UK also tended to describe their fraudsters as middle management rather than senior executives. One reason for this could be that poor economic conditions are reducing the opportunities for promotion — middle managers in the UK tend to stay at that level for longer than their global counterparts. Indeed, if middle managers can’t get promoted when they feel they deserve to be, they might find it rationalise committing a crime. Global respondents are seeing a return to the situation more common in the past where senior managers exploited their position for their own benefit.
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