Theft and cybercrime are the most reported types of crime in this year's survey
Economic crime against businesses and other organisations continues to rise around the world. Belgium, where 50% of respondents reported fraud, is clearly at the high end of the fraud spectrum compared to global levels reported in 2014, and largely exceeds the global average of 37% as well as the Western European average of 35%. In Western Europe, only France (55%) and Spain (51%) have a higher score than Belgium, according to PwC's 2014 Global Economic Crime Survey. Cybercrime reports continue to rise. In Belgium it is the second-most reported type of crime in this year's survey while globally cybercrime is ranked fourth. Cybercrime is not just a technology problem; it's also a business strategy problem.
PwC's global survey, the most extensive on the subject, found that misappropriation of company assets remains the most common form of economic crime, reported by 69% of respondents. It is followed by procurement fraud (29%), bribery and corruption (27%), cybercrime (24%), and accounting fraud (22%). Other reported crimes include human resources fraud, money laundering, intellectual property or data theft, mortgage fraud and tax fraud.
The exact direct loss associated with economic crime is difficult to assess. 38% of Belgian organisations that suffered fraud experienced a financial impact equal to or higher than US$ 100 K. This is a lower percentage compared to the global result for the 2014 survey which amounts to 46%. Companies in Belgium more frequently experience a financial impact of less than US$ 100 K (59% versus 47% globally).
For the first time this year, the survey measures procurement fraud, reported by nearly 30% of respondents globally and 25% in Belgium. Procurement fraud is seen as a double threat, victimising businesses both in their acquisition of goods and services and in their efforts to compete for new opportunities.
In addition to economic losses, Belgian respondents pointed to damage to employee morale (15%), damage to relations with regulators (6%) and damage to all business relations (6%) as other severe impacts of fraud.
"Like a stubborn virus, economic crime persists despite ongoing efforts to combat it. No organisation of any size anywhere in the world is immune to the impact of fraud and other crimes," says Rudy Hoskens, PwC Belgium Forensic Services Partner. "Those committing economic crime succeed by adapting to shifting global conditions like reliance on technology and the expansion of emerging economies."
"Even worse than the direct financial impact of economic crime is the threat it poses to a wide range of business systems which are the lifeblood of corporate operations. Economic crime damages internal processes, erodes the integrity of employees and tarnishes reputation," he added.
Where does economic crime occur?
Economic crime is a pervasive, global threat. Regionally, economic crime is most prevalent in Africa, where 50% of respondents say they have been victims, though down from 59% in 2011. It is followed by North America (41%), Eastern Europe (39%), Latin America and Western Europe (35%), Asia Pacific (32%), and the Middle East (21%).
Respondents from 65 countries and territories reported that they have experienced economic crime. South African respondents report the highest level, 69%, up from 60% in 2011. Economic crime is also growing rapidly in the Ukraine (63%, up from 36% three years ago), Russia (60% vs. 37% in 2011), and Australia (57% vs. 47% in 2011).
The survey identified eight emerging economies - Brazil, Russia, India, China, South Africa, Turkey, Mexico and Indonesia - where 40% of all respondents said they have experienced economic crime, reflecting in part a shift in wealth to those countries.
Which industries are most affected?
By industry, economic crime is most common in the financial services, retail and consumer and communications sectors. Nearly 50% of global respondents in each industry said they have been crime victims. Financial services organisations are victims of high levels of cybercrime and money laundering, while retail and consumer and communications companies have suffered from most from theft. Hospitality and leisure and government also report high crime levels (both 41%).
Who commits fraud in Belgium?
Typically economic crime is committed when three conditions are present: life pressure, opportunity and personal rationalisation for the crime. According to the survey, 26.5% of Belgian respondents reported that the main perpetrator was internal and 73.5% reported that the main perpetrator was external. There are wide variances by industry, however. In financial services, for example, nearly 60% of crime comes from outside the company, while 36% is internal.
Our results indicate that the average profile of the internal fraudster generally remained the same as in 2011 - middle-aged males (89% males and 44% between 41 and 50 years old) who have been with the organisation for more than ten years (44%) and reached a middle management level (44%). Note that this year the resulting perpetrator's education level seemed to be equally divided between postgraduate, first degree graduate and high school or lower levels of education, while in the 2011 survey the main Belgian perpetrator had a high school level of education or less. In addition, it is noteworthy that while in the 2011 survey there were no reports of Belgian internal fraudsters at a senior management level, this percentage now accounts for 22%, thereby lowering the percentage of internal fraudsters among junior staff (from 44% in 2011 to 11% in 2014).
How is fraud found?
The survey found that 55% of economic crime is discovered through corporate controls such as reporting of suspicious transactions, internal audit, or fraud risk management. Whistle-blowing systems or tips offs uncover about a quarter of reported crimes, and about one-fifth is uncovered by other means such as law enforcement, the media, or by accident.
The survey finds that global respondents expect economic crime will continue to increase in the future among nearly all categories. This result was also found in PwC's 17th Annual CEO Survey. CEOs globally also recognise the impact of economic crime; 50% said ‘lack of trust' was a key issue in the marketplace, a sharp increase from 37% a year ago. Bribery and corruption also are ranked among CEOs' top concerns.
The top five types of most common fraud for 2014 in Belgium consists of cybercrime, asset misappropriation, IP infringement, procurement fraud and money laundering.
