Internal fraud poses risk to business growth, PwC report
Middle level managers have been cited as the biggest perpetrators of fraud and economic crime in the private sector.
In a report released Tuesday, consulting firm PwC said these crimes contribute to the billions of shilling lost by firms globally.
In the 2018 Global Economic Crime and Fraud Survey, Consulting firm PwC says the incidences of economic crimes rose from sixty one percent in 2016 to seventy five percent last year.
“It’s an indication of increased awareness of economic crime and threat to organizations,” PwC Forensics Lead East Africa Muniu Thoithi said.
The report which sampled 116 respondents locally cited internal fraudsters as the biggest perpetrators of economic crime as they account for sixty two percent of the cases reported.
Interesting to note as well, was the rise in customer driven fraud identified by the survey.
According to the PwC report, 37 percent of Kenyan companies have experienced client driven fraud, with customers tasking organizations to cut corners.
Mr Thoithi said this had become a major threat to threat to business growth.
“There’s an increase in fraud committed by external partners like agents and shared service providers, but the customer was found to be committing most of the crimes,” Mr Thoithi said.
Asset misappropriation which entails theft of company assets by staff or directors, remains the most common form of economic crime at 48 percent.
The report also identified procurement departments as a major conduit for fraud in organizations.
“Procurement fraud in Kenya is at a higher level compared to our peers in East African region which average 25 percent,” he said.
67 percent of the respondents indicated they lost at least Sh2.5 billion to economic crimes in the last 24 months of operations, while two percent lost more than half a billion shillings.
Sectors hardest hit by fraud the report indicates include financial services industry, insurance industry, communications, fast moving consumer goods and public sector.
To curb the growth of these economic crimes, researchers at PwC have urged companies in Kenya to adopt a risk based framework to enable them deal effectively with detection of cases.
Additional reporting by Denis Otieno
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