While economic crime has risen globally, Canada has reported fewer instances in recent years, according to a PwC survey.
The trend may be due to Canadian organizations being more diligent in establishing robust anti-fraud regimes, including fraud risk assessments and whistleblowing systems.
“While Canada sits below the global average, the threats from economic crime continue to evolve,” says Steven Henderson, national forensic services leader at PwC. “Like a virus, savvy fraudsters adapt to the trends that affect all organizations and economic crime will continue to be a major concern for organizations of all sizes, across all regions and in virtually every sector.”
The most common type of fraud encountered by Canadian organizations was theft (58%), followed by procurement fraud (33%), cybercrime (22%) and accounting fraud (22%).
Of the Canadian respondents who had experienced economic crime in the survey, more than one in 10 reported losses of more than US$5 million. Worldwide, the number of organizations that experienced losses greater than US$100 million doubled from 1% to 2% of respondents compared to the 2011 survey.
“Beyond the numbers, the true cost of a fraud incident lies with employee morale and corporate reputation,” says Henderson. Forty-seven percent of Canadian respondents noted employee morale as being greatly impacted as a result of an economic crime.
Thirty-eight percent of Canadian respondents noted that their organization pursued an opportunity in a market with a high level of corruption risk. Of those respondents, 47% altered their business plan due to the corruption risk, while 40% did not. The remaining 13% didn’t know if they had or not.
When it comes to bribery payments, 15% of Canadian companies indicated that they have been asked to do so, while 14% believe they have lost an opportunity to a competitor who paid a bribe.
“These findings are concerning given the fact that bribery and corruption may pose the greatest threat to global establishments because of the range of business processes it threatens,” Henderson says.
“Both domestic and foreign bribery and corruption has become a major concern in Canada over the past few years,” he adds. “Companies face not only investigative costs, penalties and fines, but could face long-term reputational damage impacting the value of the company. It is critical for Canadian companies to ensure they assess their current bribery and corruption risk, and implement a robust anti-bribery and corruption compliance program to address these risks.”
Cybercrime is listed as one of the top five economic crimes in Canada and globally. Approximately one in four respondents have experienced it.
Technology advancement along with social media growth and dependence on connectivity has increased the spread of cybercrime, but it’s not strictly a technology problem, says Henderson. “Businesses aren’t being attacked by computers, but by people attempting to exploit human frailty as much as technical vulnerability. It is a strategy problem, a human problem and a process problem.”
Typically economic crime is committed when three conditions are present: life pressure, opportunity and personal rationalization for the crime.
According to Canadian survey respondents, more than half (61%) of fraud perpetrators were internal and 39% were external. The survey found that the profile of a typical fraudster is middle-aged with a college education or higher who has been with the organization for a substantial amount of time.
Canadian survey results found that 62% of economic crime is discovered through corporate control measures such as reporting of suspicious transactions, internal audit or fraud risk management. Less than 18% of economic crimes are uncovered by whistleblowing systems or tip offs.