No industry or organization is immune. Forty-five percent of U.S. respondents reported that their organization had suffered fraud in the previous 12 months, compared to 35 percent in 2009, according to a report released Tuesday by PwC.
Economic pressures, incentives, and opportunities are a significant motivator for economic crime. The survey found that the typical fraudster is between 31 and 40 years old, has been employed between three and five years and has a college degree. Furthermore, in the U.S., forty percent of internal perpetrators are women, as compared with only 19 percent around the world.
Cost of frauds over $100,000 has increased substantially, from 44 percent to 54 percent over the two year period, with 10 percent reporting that fraud had cost their organization more than $5 million.
Surprisingly, certain emerging markets such as Indonesia, India, Romania and Greece reported low levels of fraud (below 25 percent). One possible explanation could be their fraud detection methods are ineffective and/or their respondents are reluctant to report fraud.
Territories that reported high levels of fraud (40 percent or more) include Kenya, South Africa and the U.K.
The costs associated with economic crime pose a serious threat to an organization's bottom line, said Chris Barbee, who leads PwC's global forensic services practice.
Yet, the fallout isn't just the direct costs: economic crime can seriously damage brands or tarnish a reputation, leading organizations to lose market share as the society is becoming less tolerant of unethical behavior.
In the wake of the financial crisis, accounting fraud dropped to 16 percent, compared with 24 percent in 2009, as tighter controls are put in place. Meanwhile, asset misappropriation remains the most common fraud globally and in the U.S., with 93 percent of respondents citing it as one of the crimes experienced.
Asset misappropriation is largely a crime of opportunity and one of the hardest frauds to prevent, it can be compared to a leaky faucet, what seems like a trickle of water amounts to gallons over time, said Didier Lavion, principal in PwC's forensic services practice.
Consider that every dollar lost in fraud is a dollar in profit that requires multiples in revenue to recoup. A $5 million fraud may require $25 million of replacement revenue if one assumes a 20 percent profit margin, Lavion added.
Cybercrime was little heard of ten years ago, but it has increased considerably in recent years. Forty percent of respondents have been affected by cybercrime, making it the second most common fraud reported after asset misappropriation.
As for corruption, there appears to be a notable gap between the U.S. and the rest of the world.
For U.S. respondents, incidents of bribery and corruption reported within the U.S. marketplace dropped by more than half, from 16 percent in 2009 to 7 percent in 2011, largely on a continued focus on bribery by the U.S. Department of Justice and the Securities and Exchange Commission.
In comparison, global incidents only dipped 3 percent to 24 percent in 2011, from 27 percent two years ago.