Friday, 17 May, 2024
By: Anshul Vipat
The most common fraud reported by 47 percent of Indian companies was customer fraud. Image source: IANS
Fraud prevention has also become challenging for businesses, with nearly 67 percent of surveyed companies reporting that the most disruptive incident was caused by an external attack or collusion between external and internal parties
The COVID-19 outbreak in 2020 left companies with no other option but to adopt work from home culture, among dealing with other major disruptions. As a result, globally companies have witnessed a huge spike in the number of fraudsters and cybercriminals in the last two years. This is one of the major findings of a survey by PricewaterhouseCoopers (PwC).
The report titled ‘Global Economic Crime and Fraud Survey 2022: India Insights’ revealed that a whopping 52 percent of Indian companies have experienced some form of fraud or other economic crime in the last 24 months. Surprisingly, an astonishing 95 percent of these have experienced new types of fraud as a result of the disruption caused by COVID-19. These new frauds, according to the report, included misconduct risk (67 percent), legal risk (16 percent), cybercrime (31 percent), insider trading (19 percent), and platform risk (38 percent).
Source: PricewaterhouseCoopers
Customer fraud in India on the rise
The most common fraud reported by 47 percent of Indian companies was customer fraud, which includes fraud involving mortgage, credit cards, claims, cheques, etc. Cybercrime came a close second, with 45 percent of Indian organisations reporting this type of fraud. Furthermore, a notable 34 percent of Indian businesses had experienced fraud due to KYC (know-your-customer) failure in the last 24 months. With an increase in digital banking and payments, KYC fraud is another emerging risk that organisations need to watch out for.
Fraud prevention has also become challenging for businesses, with nearly 67 percent of surveyed companies reporting that the most disruptive incident was caused by an external attack or collusion between external and internal parties. Hackers (49 percent), customers (41 percent), and organised crimes (31 percent) were the most common external perpetrators.
Another emerging area of disruption is anti-embargo fraud (participation in unsanctioned foreign boycotts, or when an organisation is tricked into breaking an embargo). Though just nine percent of organisations experienced anti-embargo fraud over the last 24 months, this may change in the next two years as global sanctions rise to the highest levels in recent history. Supply chain fraud also has the potential to cause greater disruption in the coming years – 19% of organisations experienced it in the last 24 months.
Large businesses have been affected more
Fraud and economic crimes affected both big and small businesses, however, on different scales. The PwC survey found that large corporations are more likely to be victims of fraud or any kind of cybercrime. Overall, a whopping 60 percent of surveyed Indian companies, with global annual revenues exceeding $1 billion, experienced fraud during the past 24 months.
On the other hand, only 37 percent of surveyed companies, with global annual revenues of less than $100 million, experienced fraud during the same period.
In terms of financial losses, about 14 percent of companies lost $50 million or more, 28 percent lost between $1-$50 million, and 50 percent lost less than $1 million due to all incidents of fraud, corruption or other economic crimes over the last 24 months. The survey makes it clear that Indian organisations are facing multiple emerging risks that have the potential to cause greater disruption in the coming years.
Significant management challenge
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.
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.
