South African organisations have reported the highest rate of economic crime in the world over the last two years, according to a new Global Economic Crime Survey by financial services company, PwC.
PwC said that 69% of organisations surveyed report being victims of economic crime, unchanged from 2014, while 32% of organisations have experienced cyber crime.
South African organisations reported a considerably higher frequency in the incidence of economic crime in comparison to their African and global peers.
“When compared to the global statistic of 36%, we are faced with the stark reality that economic crime is at a pandemic level in South Africa. No sector or region is immune from economic crime,” said Louis Strydom, Forensic Services Leader for PwC Africa.
South Africa was ahead of France (68%), Zambia (61%), Kenya (61%), UK (55%), Spain (55%), and Australia (52%) in the biennial list.
“The fact that developed countries are included in the list of the top ten countries reporting the highest rates of economic crime brings home a clear message – economic crime is a global issue and one that affects developed markets as much as it does emerging ones,” said Strydom.
South Africans also exhibited significantly low levels of confidence in local law enforcement agencies, with 70% of organisations believing agencies are inadequately resourced and trained to investigate and fight economic crime.
This is almost twice the global rate of 44%.
PwC interviewed 6,337 participants in 115 countries, with 232 organisations interviewed locally, from a broad spectrum of industries.
The survey found that asset misappropriation remains the most prevalent form of economic crime reported by 68% of respondents. It is followed by procurement fraud (41%), and bribery and corruption (37%).
Cybercrime has risen to the fourth most reported type of economic crime in South Africa, with 32% of organisations affected – on par with the global average.
Cost of economic crime
Economic crime is costing businesses billions of dollars. While more than half of the global organisations surveyed reported having lost less than $100,000 to economic crime over the last 24 months, only 43% of South African organisations could make that claim.
Almost a fifth of local respondents experienced losses of between $100,000 (R1.6 million) and $1 million (R15.7 million), and one in four respondents indicated having suffered losses of more than $1 million.
The fraudster profile
For the first time since 2009, external actors exceeded internal actors as the dominant profile of fraudsters acting against an organisation (46% external versus 45% internal).
South African organisations were reported to be more than twice as likely to be defrauded by vendors compared to the rest of the world.
Reports of senior management perpetrating economic crimes against the organisations they work for more than halved from the previous survey (from 41% to 15%), while middle management appear to have taken centre stage, with 39% of fraud being perpetrated by internal actors emerging from this band.
Incidents reported were up 23%when compared to the previous survey conducted in 2014.
More than half of organisations (57%) believe it is likely that their organisations will experience cybercrime in the next 24 months.
Most companies are still not adequately prepared for, or even understand the risks faced, with only 35% of organisations reporting they have a fully operational cyber incident response plan in place.
It is concerning to note that should a cyber crisis arise, only 34% of organisations have personnel that are ‘fully trained’ to act as first responders, and 20% of companies indicated that they will make use of outsourced personnel, PwC said.