Fraud cases surge amid global recession

White-collar theft continues to rise Keystone

Economic crime has affected 37 per cent of businesses worldwide in the past two years, and one in four Swiss firms.

A new global survey shows that it also cost companies millions of dollars on average and harmed their corporate image.

The findings are part of a regular audit of economic crime by the accounting giant PricewaterhouseCoopers (PwC), released on Tuesday.

The firm interviewed more than 3,600 business leaders in 50 countries.

It found that 24 per cent of Swiss businesses had been affected by fraud and other “white-collar” crime in the past two years.

John Wilkinson, a partner in PwC’s forensic services division, told swissinfo that Swiss companies suffered above-average rates of money laundering and bribery cases.

“This is not surprising given Switzerland’s high proportion of financial services,” Wilkinson said.

PwC calculated that fraud cost companies on average $1.4 million (SFr1.9 million), while corruption set them back $3.8 million (SFr5.2 million) on average.

Collateral damage

The survey found that companies are increasingly becoming aware of the “non-financial” costs of fraud.

Almost half of Swiss companies affected said the crimes had hurt staff moral, while a quarter said the firm’s reputation had suffered.

“The financial loss of fraud is viewed as a one-off hit on a company’s profit-and-loss account, whereas the collateral damage can be long term,” Wilkinson said.

While money laundering accounted for 15 per cent of the cases reported by Swiss firms, more than 60 per cent said they had been the victims of asset misappropriation or fraud.

Financial misrepresentation accounted for ten per cent, corruption and bribery for 18 per cent and industrial espionage for eight per cent.

The survey also found that more and more corporate resources were being put into the prevention of economic crime.

“Companies are spending more time and energy developing effective mechanisms to fight economic crime,” Wilkinson said.

“The question is whether they are focused on the real risks. It’s all very well to protect yourself against asset misappropriation when your real risk may be theft of information,” he added.

Increased vigilance

The PwC survey shows economic crime continues to rise around the world, much of it linked to the economic downturn.

“History shows that as recession strikes, economic crime increases,” Wilkinson said.

“I suspect it may even grow, because we’re not out of the recession yet.”

He added that periods of economic downturn forced many companies to pay more attention to their internal audit systems, adding to the number of cases uncovered.

The PwC survey is likely to fuel the highly contentious debate about whether Switzerland should do more to combat money laundering.

Wilkinson said he made no apologies for the fact that some of the findings in the survey may undermine trust in corporations.

“Economic crime is a fact of life in today’s world. We’ve seen companies go bankrupt because of it.

“The more we talk about it the better things become.”

swissinfo, Jacob Greber in Zurich

Key facts

Fraud costs companies an average of $1.4 million a year (worldwide), while corruption costs them $3.8 million on average.
Africa is worst affected, with 51 per cent of companies reporting economic crime.
In the past two years 24 per cent of Swiss firms said they had fallen victim to economic crime.
Of those, 70 per cent reported asset fraud and financial misrepresentation.
A third of Swiss economic crime is detected through tip-offs, and 43 per cent by chance.