Economic crime continues to affect UK companies, with theft from employers on the rise, according to an audit firm’s Global Economic Crime Survey 2014.
The number of frauds committed by staff, as opposed to those outside an organisation, has risen from 34 per cent in 2011 to 41pc in 2013. The survey by PwC also shows that the profile of the typical fraudster is changing.
Previous surveys found that middle management were often behind economic crimes; now the findings suggest that most such crimes carried out by someone inside an organisation are by junior members of staff. Internal fraudsters are most likely to have been with a company less than five years, according to the survey of over 5,000 businesses, including nearly 400 from the UK.
Ian Elliott, PwC Forensic Services partner and author of the report, said: “Our survey shows the changing face of white-collar crime in Britain today. More and more companies are feeling the pain as economic crime continues, despite ongoing attempts to tackle it. Organisations need to be ever-vigilant for suspicious transactions. People may be feeling the effect of increases in the cost of living, giving them more incentives to turn to crime. Employers need to make it difficult for their staff to commit crimes; they cannot afford to be complacent.”
The findings show a fall in the number of UK organisations reporting economic crime, from 51pc in 2011 to 44pc in 2013. But fraud in Britain is still higher than the global average of 37pc. The type of fraud is also changing, with less accounting fraud as fraudsters turn to high-tech ways of committing economic crime. At the same time, companies have improved their internal controls, making it harder for potential fraudsters.
There has been a small drop in the reported level of cybercrime, at 24pc down from 26pc in 2011. Cybercrime was also 24pc of all reported frauds. UK businesses are more aware of the risks than ever – and more aware than their global counterparts (63pc compared to 48pc globally).
Ian Elliott, PwC Forensic Services partner, said: “Many people may not be reporting cybercrime simply because they don’t know it has happened, or because they want to keep it contained. They are concerned about what effect it has on their reputation. It’s also important to remember that it is not a technology problem, it’s a human problem, and the internal threat needs to be taken as seriously as the threat from outside an organisation.”
Less than a third of board members (32pc) reported fraud in their organisations, but below board level this climbed to 63%pc
Ian Elliott said: “Increasingly we are seeing fraud on the board’s agenda but there is still a gap between what is being reported by the Board and the reality of what is taking place in British business today.”
UK businesses continue to suffer financially from fraud. About half (52pc) felt the financial impact had increased in the last two years, compared to 42pc globally, but high-value financial losses in the UK were lower than globally, at 15pc compared with 20% suffering losses in excess of $1 million.
As a result of the Bribery Act, which came into force in 2011, most (87pc) of British organisations have made changes to policies and procedures and 37pc have had a major overhaul of their anti-bribery policies.
Ian Elliott said: “With little or no growth in the UK in the last few years, many British companies have looked overseas, to some high-risk markets. But they need to be on the alert for the potential bribery risks they may face when operating in these markets.”
UK businesses take a dim view of fraud and it leads to dismissal in 88pc of cases, compared to 79pc globally. Police were called in to companies in 63pc of cases, compared to 49pc of frauds around the world.
Ian Elliott said: “When employees just get a warning or are transferred to another department, it sends a message: the business tolerates fraud. But UK bosses have taken a stand. They will not let employees get away with defrauding them, even if it means negative publicity for them as a result.”
About the survey
For the purposes of the survey, economic crime was described as “the intentional use of deceit to deprive another of money, property or legal right”. In the UK, 372 people responded to the online survey. Respondents come from a mix of sectors and represent listed, private and public sector organisations. Some 60pc of respondents were senior executives. For the full UK report, see www.pwc.co.uk/crimesurvey
For the global report, see www.pwc.com/crimesurvey
