A survey from assurance, tax and advisory services group PricewaterhouseCoopers (PwC) found that 62 percent of South African companies had reported fraud in the last 12 months.

The group's Global Economic Crime Survey 2009 found that 54 percent those of respondents reported increased incidences of fraud in their organisations increased during the period.

The survey found that 62 percent of respondents had experienced some form of economic crime during the period, while two-thirds said that the cost of fraud had increased since this time last year.

Asset misappropriation or theft, cited by 82 percent of those who reported economic crime (compared with 67 percent globally) was the most pervasive, followed by bribery and corruption, 59 percent (27 percent globally) and financial statement fraud, cited by 39 percent, similar to the global findings. Other reported crimes included intellectual property infringement, money laundering, tax fraud, insider trading and espionage.

Organisations suffered significant

The survey of more than 3000 respondents in 54 countries was conducted in conjunction with the INSEAD business school.

In addition to direct financial losses, PwC found that organisations also suffered significant "collateral damage" due to fraud including negative impact on employee morale, business relationships, reputation and brand, and relationships with regulators.

Globally, financial statement fraud was found to be the fastest-growing form of economic crime and has more than tripled since 2003, PwC found, however the converse is true for South Africa. Financial statement fraud in South Africa decreased from 45 percent in 2005, to 39 percent in 2009.

The survey found evidence that the impact of the global recession helped drive the incidence of economic crime, and 78 percent of all respondents said that their organisation faced greater risk of economic crime in the downturn (40 percent globally).

Fear of losing jobs

And of those respondents that identified underlying business pressures or incentives as the main reason for rising incidence of fraud, 54 percent said difficulty in achieving business targets was a motivating factor for fraud during the downturn (47 percent globally). Fear of losing jobs was mentioned by 31 percent.

"The global economic downturn has heightened the pressures and incentives to commit fraud," said Louis Strydom, leader of PwC's forensics practice in South Africa. "Economic crime is pervasive, persistent and pernicious. No organisation and no industry is immune from the threat of fraud".

"In these tough times, the temptation to inflate results or take part in other forms of financial statement fraud may overcome ethical values," he added. "In an economic downturn, financial targets are more difficult to achieve, individuals may feel pressured, and their personal financial position may be threatened by reductions in pay or layoffs."

27% suffered fraud by customers

Economic crime was most prevalent at large companies, with 46 percent of organisations with more than 1000 employees reporting incidents globally.

Territories reporting high levels of economic crime included Russia, 71 percent, South Africa, 62 percent, Kenya, 57 percent, Canada, 56 percent and Mexico, 51 percent. Low levels of economic crime were reported in Japan, 10 percent, Hong Kong/China 13 percent, and the Netherlands and Turkey, 15 percent each.

Most of those committing economic crime in SA, 62 percent, worked inside the organisation they victimise, while 38 percent were external. Of the respondents reporting fraud committed by an outside party, 27 percent suffered fraud by customers and 33 percent by agents or intermediaries, according to PwC.

The survey also found that the profile of the internal fraudster is changing. Economic crimes committed by middle managers rose, accounting for 29 percent of all internal frauds, up from 22 percent in 2007.

Informal tip offs, both internal and external were responsible for the detection of 23 percent of reported economic crimes, followed by official whistle blowing channels, 21 percent (seven percent globally), and risk management systems, 15 percent.

Another 18 percent was discovered by accident, PwC found.

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