Pulling fraud out of the shadows : Global Economic Crimes and Fraud Survey 2018
Pulling fraud out of the shadows: Global Economic Crimes and Fraud Survey 2018
In PwC’s 2018 Global Economic Crime and Fraud Survey, only 49% of global organizations said they’d been a victim of fraud and economic crime. However, we know this number should be much higher. So, what about the other 51%?
Today, fighting fraud has moved front and centre to become a core business issue. Long gone are the days when it was viewed as an isolated incident of bad behaviour, a costly nuisance, or a mere compliance issue. That’s because the scale and impact of fraud has grown so significantly in today’s digitally enabled world. Indeed, it can almost be seen as a big business in its own right – one that is tech-enabled, innovative, opportunistic and pervasive. Think of it as the biggest competitor you didn’t know you had. This article sets out to plug that awareness gap. In it, we explore not only the visible fraud that companies say they are facing, but also the blind spots that stop them seeing the big picture – and what they can and should do about them.
There are four steps to fight fraud:
Recognize fraud when you see it:
Fraud risk assessments are the first step in preventing fraud before it takes root: Fraud risk assessments can help organizations do so by identifying the specific frauds they need to look for. Moreover, these assessments are increasingly looked on favourably by regulators in enforcement actions.
Conduct risk: the ‘hidden risk’ behind many internal frauds: It enables a company to better measure and manages compliance, ethics and risk management horizontally and embedded them in its strategic decision-making process. It also means fraud and ethical breaches can be approached more dispassionately, with less emotion, as a fact of life that every organization has to deal with. Moreover, adopting this more systemic – and realistic – stance towards conduct risk can enable cost efficiencies between ethics, fraud and anti-corruption compliance programs.
Looking for fraud in the right places: Survey revealed a significant increase in the share of economic crime committed by internal actors (from 46% in 2016 to 52% in 2018) and a dramatic increase in the proportion of those crimes attributed to senior management (from 16% in 2016 to 24% in 2018). Indeed, internal actors were a third more likely than external actors to be the perpetrators of the most disruptive frauds.
Take a dynamic approach: A chief executive is increasingly seen as the personal embodiment of an organization – with their finger on the pulse of every facet of its culture and operations at all times. So, when ethical or compliance breakdowns happen, these individuals are often held personally responsible – both by the public and, increasingly, by regulators. Whether merited or not, one thing is clear: the C-suite can no longer claim ignorance as an excuse.
Harness the protective power of the technology: Today, organizations have access to a wealth of innovative and sophisticated technologies with which to defend themselves against fraud, aimed at monitoring, analyzing, learning and predicting human behaviour. These include machine learning, predictive analytics and other artificial intelligence techniques.
Invest in people, not just machines: Confronted with the seeming intractability of dealing with fraud, many organizations decide to pour ever more resources into technology. Yet these investments invariably reach a point of diminishing returns, particularly in combating internal fraud. So, while technology is clearly a vital tool in the fight against fraud, it can only ever be part of the solution. This is because fraud is the result of a complex mix of conditions and human motivations. The most critical factor in a decision to commit fraud is ultimately human behaviour – and this offers the best opportunity for combating it. There is a powerful method for understanding and preventing the three principal drivers of internal fraud – the fraud triangle. The fraud triangle starts with an incentive (generally a pressure to perform from within the organization) followed by an opportunity, and finally a process of internal rationalization. Since all three of these drivers must be present for an act of fraud to occur, each of them should be addressed individually.
Audit International are specialists in the recruitment of Internal Auditors and Corporate Governance Professionals across Europe and the US.
If you would like to reach out to discuss your current requirements, please feel free to reach us on 0041 4350 830 95.
233 total views, 1 today