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India among top 3 regions in corruption-linked fraud

Staff writer |
An overwhelming 80 percent of companies polled in India said they had been victims of fraud in 2015-16, up from 69 percent in 2013-14.

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The Global Fraud Report 2015-16 by risk mitigation consultancy Kroll, with the aid of the Economist Intelligence Unit, found that the perceived prevalence of fraud in India is the third-highest among all countries and regions surveyed across six continents.

Only Colombia (83 percent) and Sub-Saharan Africa (84 percent) surpass India.

The report's authors observed that while the incidence of fraud was on the rise globally, a combination of a lack of preventive measures at Indian companies and a poor legal system had resulted in 92 percent of the respondents saying they had witnessed an increase in exposure to fraud.

The India-centric data in the report shows that the highest incidence of fraud as reported by Indian companies is due to what the report terms ‘corruption and bribery’.

A quarter of the respondents said they registered losses due to this. On average, the worldwide survey found that only 11 percent of the companies reported corruption and bribery as a source of revenue loss.

The second-highest fraud-related source of loss of revenue in India is vendor, supplier or procurement fraud, which affected 23 percent of the companies, which is also higher than the global average of 17 percent.

Interestingly, the 2013-14 survey found that the highest source of fraud-related revenue loss for Indian companies came from theft of physical assets or stock (33 percent) and both information theft, loss or attack and corruption and bribery were on a par (24 percent).

The latest report also finds that the biggest factors exposing Indian companies to fraud have changed over the last few years. Where the previous report pegged IT complexity as the biggest contributor to fraud, the 2015-16 report says the new drivers of fraud are high employee turnover and cost restraints over pay.

“While companies in India are willing to spend to improve their level of anti-fraud protection, it appears that such funds are not being invested appropriately,” the report's authors said. “For respondents that had identified the perpetrator, 59 percent indicated that junior employees were leading players in at least one such crime.”

“Despite these vulnerabilities and the high proportion of fraud perpetrated by insiders, only 28 percent of companies in India invest in staff background screening and only 55 percent invest in vendor due diligence,” they added.

Compounding the problem of inadequate preventive measures is the issue of what happens once fraud has been detected. Often, the legal system in India is not quick enough to make it worth the company’s while to go to court, the report's authors said.

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