PwC survey makes for unpleasant reading.
- Over half of UK organisations have been the victim of economic crime in the past 24 months, outstripping global rates
- Shift towards the so-called silver fraudster with 18% of fraud committed by senior management
- Cybercrime incidents in the UK up 20 percentage points since 2014
- 30% of UK organisations say they have no cyber response plan while almost 60% have no confidence in UK law authorities dealing with cybercrime
The UK has seen a double-digit rise in economic crime against corporates in the last two years, with 55% of organisations affected, an increase of 11 percentage points since 2014, significantly outstripping the level in countries such as the US (38%) and China (28%).
Globally, the economic crime rate has remained largely static at 36%.
The findings are contained in the biennial PwC Global Economic Crime Survey 2016, published today, which polled more than 6,000 participants in 115 countries, including the United Kingdom.
PwC’s Global Economic Crime Survey reveals that 60% of economic crime in the UK was committed by external perpetrators, up from 56% in 2014. While there was a decline in the number of organisations reporting economic crime perpetrated by employees (31%), there was a large increase in frauds committed by senior management which more than doubled from 7% to 18%.
Andrew Gordon, PwCs Global & UK Forensics leader, commented:
While the prevalence of traditional fraud, such as asset misappropriation, has fallen since 2014, there has been a huge rise in organisations reporting cybercrime. Technology is driving almost every other area of economic crime as well.
Business needs to minimise the opportunities for economic crime through rigorous fraud risk assessment, supported by a culture based on shared corporate values and robust policies and compliance programmes.
Cybercrime has experienced the fastest growth of all economic crime. Some 44% of UK organisations that had experienced economic crime in the last 24 months were affected by cyber incidents, a jump of 20 percentage points from 2014 – and substantially higher than the global response of 32%.
The rise of cybercrime is in stark contrast with some of the traditional forms of economic crime, including bribery, asset misappropriation and procurement fraud, which have declined.
Just over half (51%), of UK organisations say they expect to be the victim of cybercrime in the next two years, suggesting it will become the UKs largest economic crime. However, only 12% of respondents believe that law enforcement authorities have the necessary skills and resources to investigate it. Almost a third of UK entities have no cyber response plan in place.
The fast take up of cloud-based storage and growing prevalence of the internet of things are some of the reasons for this years steep increases in cybercrime in the UK, leaving anything connected to the office network now vulnerable to hackers.
Global corporate intelligence leader at PwC, Mark Anderson, commented:
Hackers are now more ambitious than ever. Their aim goes beyond targeting financial information to include a companys crown jewels customer data and intellectual property information, the loss of which, can bring down an entire business.
The threat of cybercrime is now a board level risk issue, but not enough UK companies treat it that way.
UK respondents say the greatest concern about a cyber-attack is the potential disruption to services 31% say it would have a medium-to high impact. Surprisingly, almost half say that cybercrime would have no impact on their reputation and almost 60% are not concerned about the potential for theft of intellectual property.
The silver fraudster
This years survey heralds the rise of the so-called silver fraudster in the UK with a strong shift towards more senior and experienced employees carrying out corporate fraud. Senior management fraud is often more difficult to detect and prevent, and usually has a much greater impact on an organisation. This change is therefore a particular concern for UK entities.
While those in middle management remained the most responsible for economic crime (36%), half the instances committed by staff involved employees over the age of 40, and the number carried out by staff over the age of 50 tripled from 6% to 18%.
The Economic Crime Survey found that 45% of internal fraudsters had worked for more than five years within the organisation they defrauded and 21% had more than a decade of service. In contrast, the number of junior staff carrying out economic crime has fallen since 2014 from 45% to 28%.
Compliance and Culture
While the vast majority (86%) of UK organisations have formal business ethics and compliance programmes in place, far fewer (63%) back up these rules with regular training and communication. Moreover, frauds that staff typically commit, such as accounting and HR fraud, have risen in number in the last two years.
Financial services companies are set to be the biggest spenders on compliance in the UK in the next two years while compliance budgets for other industries are under pressure as they face demands to do more with less, according to survey responses.
Tracey Groves, the head of ethics and compliance in PwCs UK Forensics practice, commented:
Economic crime is a question of culture, not just compliance. Even the best compliance programmes will fail if a companys culture accepts wrong-doing as a norm.
While it is encouraging that so many UK organisations understand the value of having a code of conduct, its crucial to back it up through regular training and engagement with employees. Unfortunately our survey shows this just isnt happening enough.
In other findings:
- 20% of UK organisation say they have never performed a fraud risk assessment while 44% do so annually.
- 5% of respondents say they have been asked to pay a bribe in the past 24 months while 7% feel they lost a business opportunity to a competitor who was willing to pay it.
- 22% of frauds were detected through suspicious transaction monitoring, fraud risk management (14%); data analytics (8%); internal audit (8%) and accidental discovery (8%).