Study shows rise in business fraud in the Middle East

Times News Service

MUSCAT: A significant increase in financial fraud in the Middle East was reported by a recent study in which 34 per cent of respondents reported such cases, compared with 26 per cent in 2016. Asset misappropriation, business misconduct and fraud committed by consumers were the three most common cases reported by respondents in the study conducted by PricewaterhouseCoopers (PwC).

Internal Audit was the main contributor in detecting the most disruptive fraud experienced by respondents in the last 24 months (20 per cent), followed by internal tip-offs (18 per cent), fraud risk management and suspicious activity monitoring (both at 14 per cent).

Organisations were realising the rising value of anti-fraud technologies, and were looking to extend their investment and usage of it, the study said. PwC, which has been monitoring trends in fraud and economic crime throughout the region since 2011, on Wednesday released its “2018 Middle East Economic Crime and Fraud Survey — pulling fraud out of the shadows,” which analyses feedback from organisations across the region on this issue.

“Social and environmental pressures are increasing the focus on fraud and economic crime across the region. This rise is unsurprising as these issues are becoming more acute within organisations. This increased awareness is clearly articulated in the survey findings, as 34 per cent of respondents reported fraud and/or economic crime incidents in the last 24 months,” Nick Robinson, Forensic Leader at PwC Middle East, said.

“Technology is proving to be a strong ally. Organisations in the Middle East are making growing use of technology in their anti-fraud efforts, with 82 per cent agreeing that using technology for real-time monitoring assists in combating fraud,” Robinson added.

Internal actors

Fraud instigated by internal actors is increasing rapidly, accounting for 48 per cent of economic crimes reported in the Middle East, slightly below the global average of 52 per cent. Senior and middle management were the main perpetrators, accounting for 62 per cent of cases reported. The study showed that the proportion of organisations that had performed a fraud and economic crime risk assessment within the past 24 months had leapt to 77 per cent in 2018 from 47 per cent in 2016.

“Preventing and discovering fraud in organisations is not an easy task. It involves a focus on culture and people, in addition to investing in controls and technology. Organisations in the Middle East with formal business ethics and compliance programmes increased from 79 per cent to 82 per cent in the last 24 months,” said Tareq Haddad, Investigations Leader at PwC Middle East.

“In addition, the results of the survey emphasised the need to think outside the box when designing controls, as 52 per cent of respondents pointed to the use of email monitoring as a valuable technique in combating fraud,” he added.

Some 42 per cent of Middle East organisations reportedly increased the money allocated to combating fraud and economic crime in the past 24 months, the same proportion as on a global level. And 49 per cent planned to increase it in the next 24 months, against the global figure of 44 per cent — indicating that the focus on fraud was set to rise more quickly in the Middle East than elsewhere.

Over the past 24 months, disruptive economic crime had cost 46 per cent of respondent organisations between $100,000 and $50 million dollars.

“Our 2018 Middle East Economic Crime and Fraud survey highlights the need for organisations to take proactive steps towards understanding fraud more comprehensively by uncovering fraud blind spots and taking necessary action to prevent it,” concluded Robinson.