Fraud in decline with companies on the alert

Fraud has decreased globally for a second consecutive year with the number of companies saying they fell victim dropping to 61 per cent from 75 per cent a year ago, Kroll's sixth Annual Global Fraud Survey found.

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Fraud has decreased globally for a second consecutive year with the number of companies saying they fell victim dropping to 61 per cent from 75 per cent a year ago, Kroll's sixth Annual Global Fraud Survey found.

The average cost of fraud also dropped, slipping to 0.9 per cent of revenues from 2.1 per cent.

"This [decline] surely reflects the efforts of companies to actively manage their fraud risk," Tom Hartley, the president and chief executive of Kroll Advisory Solutions, noted in the report's introduction.

However, he warned companies against becoming complacent, adding that fraud is "anything but defeated."

The main threat of fraud comes from within an organisation, with 66 per cent of firms citing an insider as a key perpetrator, up from 60 per cent last year and 55 per cent the previous year.

A total of 30 per cent of companies said they were most vulnerable to information theft.

In the Arabian Gulf, including Saudi Arabia, the prevalence of fraud was lower than the global average, with fewer than 50 per cent of firms reporting a fraudulent incident.

In three areas, however, fraud in the Gulf was close to the global average: management conflict of interest (15 per cent), corruption (10 per cent) and regulatory breach (10 per cent).

Insiders were also the most likely culprits, with 68 per cent of firms that knew the criminal saying it was an employee or agent.

However, one striking difference in the Gulf is that 26 per cent of fraud incidents involved a government official or regulator, compared with just 14 per cent worldwide.

"This does not mean that the region's officials are inherently less trustworthy than in other regions: the survey puts corruption levels in the Gulf slightly below the global average," said the report.

"Instead, the relative absence of other types of fraud throws into sharper relief one of the problems that does exist - a tendency of some managers and officials to work together in inappropriate ways."

The report also noted that while companies in the Gulf were more likely than average to be preparing to invest in anti-fraud strategies, they were not addressing corruption as aggressively as other nations.

The survey of more than 830 senior executives in a wide range of industries was conducted by the Economist Intelligence Unit in July and August this year.