As­set theft is top eco­nomic crime in China

China Daily (Canada) - - BUSINESS - By CAI XIAO caix­iao@chi­nadaily.com.cn

China’s eco­nomic crime ratemay be lower than that of the world, but many com­pa­nies in the Chi­nese main­land are ex­tremely con­cerned about bribery, cor­rup­tion and pro­cure­ment fraud, ac­cord­ing to a PwC sur­vey re­leased on Thurs­day.

The anal­y­sis is based on re­sponses from more than 5,000 ex­ec­u­tives from 95 coun­tries and re­gions, in­clud­ing 85 in the Chi­nese main­land and 116 in Hong Kong and Ma­cao, and given dur­ing the past 24 months.

The re­port said 27 per­cent of main­land re­spon­dents and 16 per­cent from Hong Kong andMa­cao said they had been vic­tims of eco­nomic crime, com­pared with 37 per­cent glob­ally and 32 per­cent in Asia Pa­cific.

But a re­duced ca­pa­bil­ity among main­land-based or­ga­ni­za­tions to de­tect eco­nomic crime could partly ex­plain the re­sults.

As­set mis­ap­pro­pri­a­tion in China was the largest type of fraud re­ported, which was in line with global re­sults.

In the main­land, pro­cure­ment fraud came sec­ond, as re­ported by re­spon­dents who said their or­ga­ni­za­tions had suf­fered eco­nomic crime.

It was closely fol­lowed by bribery and cor­rup­tion in the main­land, and money laun­der­ing and cy­ber­crime in Hong Kong andMa­cao.

“Two recurring themes fea­tured heav­ily in the Chi­nese main­land within the sur­vey: con­cern about bribery and cor­rup­tion and that of pro­cure­ment fraud and kick­backs,” said John Donker, a Hong Kong-based part­ner at PwCChi­nawhowas re­spon­si­ble for the sur­vey.

About 39 per­cent of main­land re­spon­dents who said they were crime vic­tims said they had ex­pe­ri­enced bribery and cor­rup­tion, and 41 per­cent pre­dicted that it would in­crease.

Re­spon­dents in the main­land said they were five times more likely to be asked to pay a bribe than re­spon­dents in Hong Kong and one-and-ahalf times like­lier than re­gional and global av­er­ages.

Their con­cern about bribery and cor­rup­tion were said to stem partly from the on­go­ing anti-cor­rup­tion drive on the main­land, which has re­sulted in dis­ci­plinary mea­sures against of­fi­cials na­tion­wide and in­volved multi­na­tional cor­po­ra­tions and their for­eign ex­ec­u­tives.

“We have al­ready seen China govern­ment’s in­creas­ing ef­forts to ad­dress this,” Donker said.

Pro­cure­ment fraud was iden­ti­fied by main­land re­spon­dents as one of the most fre­quently ex­pe­ri­enced eco­nomic crimes, with 48 per­cent of re­spon­dents suf­fer­ing eco­nomic crimes say­ing they en­coun­tered it mainly dur­ing stages of ven­dor se­lec­tion, con­tract­ing and bid­ding process. The fig­ure was sig­nif­i­cantly higher than the global re­sult of 29 per­cent.

The sur­vey also showed that in al­most four out of ev­ery five eco­nomic crimes re­ported in the Chi­nese main­land, the per­pe­tra­tor was iden­ti­fied as some­one in­side the com­pany and that 28 per­cent of these per­pe­tra­tors were un­der the age of 30.

“The preva­lence of in­ter­nal eco­nomic crime themes sug­gests that many or­ga­ni­za­tions in China need to con­tinue to fo­cus ef­fort on im­ple­ment­ing and en­forc­ing in­ter­nal con­trols,” Donker said.

“They need to ad­dress a lack of or­ga­ni­za­tional trans­parency and en­sure that they mon­i­tor sup­pli­ers and em­ployee re­la­tion­ships.”

The data-de­pen­dent businesses in Hong Kong, com­bined with the rapid growth of so­cial me­dia, un­der­score the grow­ing threat posed by cy­ber­crime. In Hong Kong and Ma­cao, 37 per­cent of re­spon­dents said they had been vic­tim­ized by cy­ber­crime.

In ad­di­tion, 99 per­cent of re­spon­dents said that the risk of cy­ber­crime has re­mained at a steady level or in­creased.

“Ul­ti­mately, cy­ber­crime is not strictly a tech­nol­ogy prob­lem but a strat­egy prob­lem, a people prob­lem and a process prob­lem,” said Ramesh Moosa, a part­ner at PwC China.

“Or­ga­ni­za­tions are not be­ing at­tacked by com­put­ers but by people at­tempt­ing to ex­ploit hu­man frailty as much as tech­ni­cal vul­ner­a­bil­ity,” he pointed out.

The sur­vey also found that 37 per­cent ofHong Kong and Ma­cao re­spon­dents had en­coun­tered money laun­der­ing, three times more than re­gional and global av­er­ages.

“The con­cen­tra­tion of fi­nan­cial ser­vices businesses in­HongKong and risks faced by Ma­cao’s large gam­ing sec­tor, com­bined with in­creased lo­cal and global reg­u­la­tory ac­tiv­ity, makes this a sig­nif­i­cant area of fu­ture fo­cus,” said Donker.

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