Hyderabad/New Delhi: At least 52 percent of Indian companies experienced fraud or economic crime in the last 24 months and an overwhelming 95 per cent of these have experienced ‘new fraud’ as a result of the disruption caused by COVID-19, according to PwC’s recent report Global Economic Crime and Fraud Survey 2022: India Insights.
Following the outbreak of the COVID-19 pandemic, the uncertainties associated with it, and the subsequent shift to digital operations and remote working, businesses have been exposed to new risks related to digital security, employee safety and disinformation. These in turn have led to new incidents of fraud, the report stated.
GECS 2022 surveyed 1,296 organisations across the world, out of which 112 were from India and represented 32 diverse industries. Over 76 per cent of the respondents from India sit in the C-suite. The India survey covered both small and large organisations.
Nearly 67 per cent of organisations in India that experienced fraud reported that the most disruptive incident came via an external attack or collusion between external and internal sources. This proportion was 56 per cent in our 2020 survey, it said.
On the bright side, companies in India have been undertaking fraud prevention measures to combat fraud which are working – 52 per cent of Indian organisations experienced fraud or economic crime within the last 24 months, as opposed to 69 per cent in our 2020 survey.
The new types of fraud experienced by companies include misconduct risk (67%), legal risk (16%), cybercrime (31%), insider trading (19%), and platform risk (38%).
Misconduct was the biggest challenge faced by organisations as bad actors began collaborating and taking advantage of pandemic-related uncertainty and volatility.
Amongst organisations that reported fraud, conduct risk (or risks associated with individuals within the firm, or vendors, agents and customers) was the biggest threat at 90 per cent.
Fraud and economic crimes impact both big and small firms. However, the survey found fraud to be more prevalent amongst big firms: 60 per cent of companies surveyed in India having global annual revenues above USD 1 billion experienced fraud during the past 24 months (globally, 52% of organisations with revenues over USD 10 billion experienced fraud), the report said.
The impact on smaller companies was less extensive as only 37 per cent of companies in India with global annual revenues below USD 100 million experienced fraud during the past 24 months (global: 38%), the report added.
Puneet Garkhel, Partner and Leader, Forensics Services, PwC India, said: ‘With organisational perimeters becoming more vulnerable over the past two years, it is imperative for businesses to not only continually focus on policies, training and internal controls but also prioritise investing in sophisticated technologies to manage and mitigate the evolving nature of frauds. It is increasingly becoming important for organisations to understand the end-to-end life cycle of customer-facing products and also strike a balance between user experience and fraud controls. Over time, formidable actors become better at exploiting cracks.’
In India, customer fraud (e.g. frauds involving mortgage, credit cards, claims, cheques) was the top fraud reported by 47 per cent of companies while the Cybercrime came to a close second, with 45 per cent of Indian organisations reporting this type of fraud and KYC failure was experienced by 34 per cent of Indian firms that experienced fraud, corruption or economic/financial crime in the last 24 months, the report revealed.