25th Apr, 2016
Local firms are among global companies losing billions due to various forms of economic crimes as documented in a report by audit firm PricewaterhouseCoopers (PWC).
According to the audit firm, in 2016, incidences of economic crime went up by 61 percent compared to 52 percent in 2014 which is 25 per cent above the global average.
72 percent of the survey respondents in Kenya have experienced at least one incident of asset misappropriation in their organization, with 47 percent and 37 percent experiencing one incident of bribery and corruption and procurement fraud respectively.
More than half of the organizations surveyed in Kenya experienced economic crime in the last two years, with cybercrime affecting a quarter of those organizations.
The PWC survey says Cybercrime is increasingly becoming a threat to organizations trying to adapt to the new digital world. Kenya’s rapid rate of growth and development especially in technology has led to the emergence of new threats presented by digital communication and hazy regulation in an increasingly integrated world. This means organizations have to come up with more innovative ways to minimize or completely eliminate these threats.
Adopting a risk based framework will allow for companies to efficiently communicate and collaborate on cybersecurity measures, both internally and externally.
PWC Kenya released the report and commented on the global high level findings as well as in Kenya specifically as regards to changes and trends in economic crime. The survey received more than 6,000 responses from senior executives in 115 countries including 99 respondents from Kenya, representing about 15 percent of the African respondents.
‘The global theme, which is also common from a Kenyan perspective is “Opportunity”, both in terms of the enablers of economic crime incidences and of greatest importance to organizations; how they can counter the economic crime trends through continuous and proactive measures. Investing in systems to combat economic crimes needs to go hand in hand with investing in the people that are entrusted with the assets and systems in these organizations’ said Muniu Thoithi, PWC’s Forensics Leader in Eastern Africa.
According to the survey, most economic crimes continue to be committed by internal fraudsters who were responsible for 70 percent of the cases reported by Kenyan organizations. Customers are the primary external fraudsters with 50 percent of respondents identifying this group as the main perpetrators. Agents, intermediaries and vendors account for 10 percent each.
‘A common assumption is that vendors have been mostly responsible for fraud, however it is the convergence of both the internal and external fraudster that poses the greatest risk to organizations’ added Muniu.
68 percent of respondents are concerned that they will experience asset misappropriation in the next 24 months. Asset misappropriation is defined as the theft or embezzlement of company assets by directors, other fiduciaries or employees. The high incidence indicates that preventative measures, systems and controls need to be reviewed and new methods of control within organizations introduced as this form of economic crime still poses a high risk among Kenya, Africa and global respondents.
‘A worrying trend in the survey is the low levels of confidence in local law enforcement’s ability to investigate and prosecute economic crimes. Respondents in Kenya were the least confident and most pessimistic globally at 79 percent against a global average of 44percent. The government therefore has a role in strengthening the capabilities of law enforcement agencies as well as enforcing existing legislation so as to tackle this challenge more effectively’ noted Muniu.
According to the results of this survey, only 5 percent of respondents in Kenya reported money laundering as an economic crime experienced in their organization. It is also positive to note that 64 percent of respondents in Kenya reported that it is unlikely that the organization will experience money laundering in the next twenty four months. Given these developments, organizations in Kenya need to stay ahead of the regulatory curve by investing in the right resources to ensure they comply with all the regulatory requirements.
