Economic crime: What you don’t know can hurt you
•One third of New Zealand respondents say their workplaces are victims of fraud.
•The ‘Big Five Frauds’ affecting New Zealand’s businesses are theft (70%); procurement fraud (19%); bribery and corruption (15%); human resources fraud (15%); and cybercrime (11%).
•Economic crime erodes employee morale, reputation and the bottom line.
One third of New Zealand respondents report their workplaces being victimised by economic crime in the past two years (33%), lower than the global average at 37% and significantly below our neighbours in Australia at 57%.
While business confidence is high and the economic outlook looks bright, fraud is an unfortunate downside for businesses, finds PwC’s 2014 Global Economic Crime Survey.
PwC Forensic Services Partner Eric Lucas says, “Fraud continues to hit New Zealand companies in the pocket – and while it can be hard to measure the cost of goods falling off the back of trucks, kickbacks, the theft of intellectual property and ideas – we know that financial costs are far from the only or most costly concern.
“Economic crime erodes employee morale, damages external relationships, tarnishes your reputation and the bottom line. This may explain why some fraud goes unreported,” warns Mr Lucas.
For the first time this year, the survey asked respondents about procurement fraud, reported by 19% of New Zealand organisations affected by economic crime. Procurement fraud is seen as a double threat, victimising businesses both in their acquisition of goods and services and in their efforts to compete for new opportunities.
Mr Lucas adds, “The Canterbury rebuild is continuing apace, we’re trading more with emerging markets, face rapid urbanisation in cities such as Auckland and with our digital capabilities eliminating the tyranny of distance businesses have faced for so long new threats have arisen with fraudsters increasingly turning to technology to assist their criminal activities.”
“New Zealand organisations must remain alert to the threats they face, particularly in this environment where we can expect investment activity to accelerate. Businesses may not know if their organisation is being targeted by fraudsters or not.
“While the survey suggests New Zealand ranks lower for economic crime than many other countries, it must be asked whether our organisations are adequately monitoring and aware of fraud and security breaches or simply not reporting them. For example, global respondents told us around a quarter have been a victim of cybercrime compared to New Zealand’s 11%,” adds Mr Lucas. “Significantly our respondents expect cybercrime to be double from current reported levels to 22%, over the next two years.”
Further, being a systemic problem, cybercrime’s direct economic impact can be exceeded by the effect on employee morale, brand and reputation.
“Pleasingly, the results of our Global CEO Survey show New Zealand business leaders are beginning to take the threat of cybercrime seriously with 4 in 10 worried about cyber threats and the lack of data security. Cyber worries are moving up the threat radar and on the minds of the c-suite,” says Mr Lucas.
With new anti-money laundering legislation coming into effect in 2013, respondents reported high awareness of the legislation (82%) and a similar number reporting they were aware of the requirements to be fully compliant.
“As trade with Asia increases, New Zealand businesses are increasingly exposed to countries which may have higher levels of corruption. There are significant risks for New Zealand entities in engaging in facilitation payments which seek to by-pass official processes or transparent contractual arrangements,” concludes Mr Lucas.
Encouragingly, the survey found 71% of New Zealand respondents have a whistleblowing mechanism, with 37% of crime detected through tip-offs. While corporate controls are responsible for detecting 56% of crimes.