Protection against fraud lacking: PwC

> Organisations not taking sufficient measures against economic crimes, with business misconduct taking top spot

KUALA LUMPUR: Organisations are not taking sufficient measures to protect themselves from fraud despite economic crimes having risen in Malaysia over the last two years from 28% in 2016 to 41%, with business misconduct taking the top spot as the most pervasive type of economic crime, according to PwC’s Global Economic Crime and Fraud Survey 2018.

After business conduct/misconduct (45%), overtaking asset misappropriation (41%) and bribery and corruption (35%) emerged as the most pervasive economic crime in Malaysia.

“Organisations are feeling the pressure to weed out fraud at the highest levels, especially with declining public tolerance for bribery and corruption. We believe they can start by tackling the root of the problem: organisational culture,” said PwC Malaysia managing partner Sridharan Nair.

It’s encouraging that 75% of our respondents have a formal business ethics and compliance programme in place, highlighting that a change from within should be an active ingredient in the remedy against fraud and economic crime. For such measures to be effective, C-suite executives themselves should encourage employees to speak up and report dishonest behaviours without fear,” he added.

The report also found that 69% of such crimes committed were internal jobs, of which 32% was from the senior management levels.

PwC Consulting Associates (M) Sdn Bhd forensic services & risk consulting leader Alex Tan said having a strong corporate culture which advocates zero tolerance towards fraud is important.

However, without sufficient controls in place, organisations risk allowing economic crimes to fall through the cracks.

“Unfortunately, only 27% of respondents detected fraud through corporate controls, such as suspicious activity monitoring and internal audit. Disparate processes like weak internal controls often lead to poor internal transparency, impacting trust among employees,” he noted.

Being reactive can also damage your company’s reputation or brand strength. This is concerning, considering the level of preparedness among Malaysian companies. 19% of respondents have not performed any form of risk assessment in the last two years (almost double the global average). 48% of our survey respondents spent an amount that was equal to or more than the cost of the fraud itself to investigate and rectify issues,” he added.

Nearly half of the 124 Malaysian respondents reported being targeted by cyber attacks in the past two years and yet 26% said that they do not know if technology is used to monitor fraud and economic crime, while 36% said they do not use technology at all.

As far as the usage of technology goes, almost all of them agree there are benefits, with 75% of respondents saying that technology enables monitoring in real time, while 72% said they derive actionable insights from their monitoring activities.

Malaysian respondents are also lagging behind in the adoption of artificial intelligence (AI) as 85% said they have no plans or are not aware of any such plans to implement AI or advanced analytics.

Tan said organisations need to recognise that implementing disruptive technologies – which would allow for anomalies to be detected more effectively – may be expensive, but worth the investment.

PwC’s Global Economic Crime and Fraud Survey 2018 included 7,228 respondents from 123 territories of which 124 respondents were from Malaysia.