If you thought fraud wasn’t as big of an issue anymore at US companies, think again.
Forty-five percent of organizations in the United States experienced some type of fraud in the past two years, more than the global average of 37 percent, while 54 percent of US companies reported fraud in excess of $100,000, with 8 percent reporting fraud in excess of $5 million, according to a recent global survey from Big Four firm PwC.
In addition, two types of economic crimes are particularly on the rise: accounting fraud (up from 16 percent in 2011 to 23 percent in 2014) and bribery and corruption (up from 7 percent in 2011 to 14 percent in 2014), PwC found in its report, Economic Crime: A Threat to Business Processes.
“The reality of fraud is that it can impact a company’s revenues as directly as other business and market forces,” Steven Skalak, partner in PwC’s Forensic Services practice, said in a written statement. “The risk of bribery and corruption grows as US organizations increasingly operate in and pursue opportunities in high-risk markets.”
Who is committing fraud? According to PwC, 54 percent of internal frauds were committed by middle management, compared to 45 percent in 2011. The profile of internal fraudsters is male, thirty-one to forty years old, employed between three and five years, and a college graduate.
Eighty-six percent of US organizations have a whistleblower mechanism, according to the report, compared to only 62 percent of global organizations.
“With more opportunities come more risks; no longer can organizations focus their fraud prevention and detection strategies on only a few types of fraud, a certain profile of fraudster, or certain perceived threats. They must be prepared to cast a wider net, for the threats associated with fraud are growing,” said Didier Lavion, PwC principal and lead author of the US report.
PwC also found that companies are beginning to change how they think about cybersecurity, viewing it as a business issue, not just an IT issue. More than one in four (44 percent) US organizations that experienced fraud in the past twenty-four months suffered from cybercrime. Forty-four percent of all US respondents indicated they thought it was likely their organization would suffer from cybercrime within the next two years.
Seventy-one percent of US respondents indicated their perception of the risks of cybercrime increased over the past twenty-four months, rising 10 percent from 2011. However, those respondents were generally less aware of the cost of cybercrime: 42 percent compared to 33 percent of global respondents.
“US corporations need to better leverage and implement the computational and analytical power of cybersecurity technologies to help combat the increasing global presence of cybercrime,” Lavion added.
About the survey:
The PwC 2014 Global Economic Crime Survey was completed by 5,128 respondents from ninety-five countries between August and October 2013. Of the respondents, 50 percent were senior executives, 35 percent represented publicly listed companies, and 54 percent were from organizations with more than 1,000 employees. There were 115 US respondents; of these, 36 percent were senior executives, 53 percent represented publicly listed companies, and 76 percent were from organizations with more than 1,000 employees.