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Economic crime in South Africa hits record levels –Report

Economic crime in South Africa hits record levels –Report

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South African organisations continue to report the highest instances of economic crime in the world, with economic crime reaching its highest level over the past decade, according to PwC’s biennial Global Economic Crime Survey released Tuesday (today).

South African organisations that have experienced economic crime are now at a staggering 77 per cent, followed in second place by Kenya (75 per cent), and thirdly France (71 per cent).

With half of the top 10 countries who reported economic crime coming from Africa, the situation at home is more than dire.

The Global Economic Crime and Fraud Survey examines over 7,200 respondents from 123 countries, of which 282 were from South Africa.

Trevor White, PwC Partner, Forensic Services and South Africa Survey Leader, says: “Economic crime continues to disrupt business, with this year’s results showing a steep incline in reported instances of economic crime.

“At 77 per cent, South Africa’s rate of reported economic crime remains significantly higher than the global average rate of 49 per cent. However, this year saw an unprecedented growth in the global trend, with a 36 per cent period-on-period increase since 2016.”

Economic crime in South Africa is now at the highest level over the past decade. It is also alarming to note that six per cent of executives in South Africa (Africa five per cent and Global seven per cent) simply did not know whether their respective organisations were being affected by economic crime or not.

While the overall rate of economic crime reported was indeed the highest for South Africa, the period-on-period rate of increase for South Africa and Africa as a whole was below that of our American, Asian and European counterparts.

From a regional perspective, the biggest increase in experiences of economic crime occurred in Latin America, where there was a 25 per cent increase since 2016 to 53 per cent in respondents who indicated they had experienced economic crime.

The US was a close second with a 17 per cent increase over 2016 to 54 per cent of respondents, while Asia Pacific and Eastern Europe experienced increases of 16 per cent and 14 per cent, respectively.

White comments further: “We believe that these jumps in reported crime are being driven by a heightened state of fraud awareness by respondents, and in this lies the silver lining.”

“We have seen paradigm shifts in the way that businesses are being run. Notably, the accountability for fraud and economic crime has moved into the executive suite, with the C-suite increasingly taking responsibility, and the fall, when economic crime and fraud occur.

“Organisations are beginning to shed their denial complex regarding the many blind spots they have in identifying fraud and are learning how to address them.”

Asset misappropriation continues to remain the most prevalent form of economic crime reported by 45 per cent of respondents globally and 49 per cent of South African respondents.

While the instances of reported cyber crime showed a small decrease in the South African context (29 per cent in 2018 versus 32 per cent in 2016), it retained its second place in the global rankings (31 per cent) albeit at a lower rate of occurrence than 2016.

One of the new categories of economic crimes was that of “fraud committed by the consumer”. It is the second most reported crime in South Africa at 42 per cent and takes third place globally at 29 per cent.

This was followed closely by procurement fraud (39 per cent in South Africa versus 22 per cent globally).

This indicates that the entire supply chain in South Africa is fraught with criminality. When combined with the high instances of bribery and corruption reported (affecting more than a third of organisations at 34 per cent), the resultant erosion in value from the country’s gross domestic product (GDP) is startling.

Accounting fraud, which is usually perpetrated by senior management and results in the largest losses, increased from 20 per cent to 22 per cent. (APO)

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