Johannesburg - South African companies have reported a
significant increase in tax and market fraud, a Global Economic Crime Survey
released on Wednesday showed.
"This increase is also reflected in a shift in the
South African perpetrator profile towards senior management," said Louis
Strydom, head of forensic services practice at PwC, the company that conducted
the survey.
In 2011, 36% of internal economic crimes were carried out by
senior management compared to only 17% in 2009, he said.
"These economic crimes require access to sensitive
information and more sophisticated know-how which senior management usually
possess.
"These crimes have previously not been as prevalent in
South Africa and the increase could suggest that organisations need to revisit
their fraud risk management frameworks to ensure that they are able to deal
with the emerging threats," Strydom said.
The survey conducted every two years fielded 3877 senior
representatives from more than 70 countries. In South Africa, 123 organisations
across 19 industries took part.
Strydom said the survey indicated that economic crime
remained a challenge for business leaders worldwide, particularly in South
Africa where 60% indicated that they had experienced some form of
economic crime in the 12 months preceding the survey.
The global average was 34%.
"On the positive side, the survey found that this
overall prevalence of economic crime in South Africa has decreased from 83% in
2005," he said.
The drop in the overall incidence of economic crime was
as a result of corresponding decreases in the misappropriation of assets,
bribery and corruption, and financial statement fraud, Strydom said.
Steady decrease
These three crimes had decreased steadily over the past six
years and this could be attributed, among other things, to internal fraud
risk management frameworks making progress in South Africa and getting better at detecting and preventing economic crime.
Countries that reported high levels of fraud at 40%
or more included Kenya, South Africa, Australia and New Zealand, suggesting
that fraud was not only endemic in developing countries.
Those that reported low levels of fraud at 25% or
less were Japan, Indonesia, Italy and Greece.
"However, these results can be affected or distorted by
ineffective fraud detection methods or the reluctance of organisations in those
countries to report fraud," Strydom said.
For the first time since PwC conducted the survey, economic
crime in South Africa was being committed equally by internal and external
perpetrators.
Globally, the majority of crimes were still being committed
by internal parties.
"Overall, South African organisations resorted to
criminal and civil action more often than their global counterparts.
"However, with regard to the most serious economic
crimes committed by insiders, South African companies took no action in 6% of cases, opted for employee transfers in 3%, or warnings in
14% of cases," Strydom said.
This was worrying as it suggested that these perpetrators
still remained within the organisation and might be able to commit further
transgressions.
The survey also found that cybercrime had emerged as a
significant contributor to economic crime losses in South Africa and was
considered the fourth most common economic crime after the misappropriation of
assets, bribery and corruption, and financial statement fraud.
About 59% of organisations said they monitored their
employees' use of social networks.
"While social media sites such as Facebook, Twitter or
LinkedIn may not be a direct source of cybercrime, social media sites can be
used to collect information about a targeted individual, to research certain
staff members or to install malware onto the user's computer, making the
cybercrime more effective," Strydom said.
"Advances in technology are fast-paced, as are
fraudsters. Those organisations ready to understand and embrace the risks and
opportunities of the cyber world will be the ones to gain competitive advantage
in today's technology-driven environment," said Strydom.
The survey was the sixth to be conducted by PwC, the brand under which member firms of PricewaterhouseCoopers International
Limited (PwCIL) operate and provide services.
It was conducted between June and November 2011.