CAPE TOWN – More than two thirds of South African organisations say that they have been victims of economic crime in the last 24 months. This is according to PwC’s Global Economic Crime survey.
Economic crimes include misappropriation of assets, procurement fraud, bribery and corruption, money laundering, human resources fraud and cybercrime.
The 69% of South African respondents that reported that they had been victims of economic crime was the highest in the world, and is nearly double the global statistic of 36%. It is also noticeably higher than the African average of 57%.
“We are faced with the stark reality that economic crime is at a pandemic level in South Africa,” said forensic services leader for PwC Africa, Louis Strydom. “No sector or region is immune.”
The survey interviewed senior level management at 232 organisations across South Africa, with 83% of respondents coming from the private sector. The responses clearly showed that far from being only an issue in government, economic crime is a universal problem.
Inadequate law enforcement
PwC also found that 70% of South African respondents viewed local law enforcement as inadequately resourced to fight economic crime. This was again well above the global rate of 44%.
This translates into a low success rate in investigating and prosecuting offenders, which means that there is little to discourage them.
“People think that they can get away with it,” said PwC’s forensic services and global survey leader Trevor White. “The perception is that if I’m caught I may get fired, I may get sued, I may have to pay the money back, but the chances of being criminally prosecuted successfully and sent to jail are fairly low. So the deterrent is not there.”
Lack of leadership
White also believes that the survey showed that organisations themselves are not taking a strong enough stand. This is an issue that demands leadership.
“We found that 69% of respondents agree strongly that bribery is not acceptable,” he said. “But when we asked how many of them take a public stand against corruption, the figure drops to 43%. These are senior level respondents and they are not prepared to take a public stand to say that this is wrong. And that filters all the way through the .”
He added that while many organisations might have policies about fraud, bribery and corruption, these are not ‘living documents’.
“People have been quick to have a policy, bring it out, tell the public about it and then file it away,” White said. “But the leaders at the top have got to drive it so that it becomes a way of life for the organisation. Unfortunately that’s not happening, and as a result people are more inclined to take a chance.”
The survey found that the fastest growing category of economic crime not only in South Africa but across the world, was cybercrime. Incidents reported were up 23% in comparison to the last survey, conducted in 2014, and 57% of respondents said that they believe it is likely that their organisations will experience cybercrime in the next 24 months.
Despite the seriousness of the situation, however, organisations do not seem to be doing enough to prevent and pre-empt problems.
“Only 38% of boards are actually asking for information on a regular basis about their organisation’s ability to deal with cybercrime,” White said. “For the majority it is not something on their radar, and as a result they don’t have a plan in place, or it’s not being driven by the board.”
He added that when incidents of cybercrime occur, the priority is most often to get the systems up and running again, and so organisations don’t deal adequately with stopping another breach happening in future.
“Organisations need to have a plan to identify breaches earlier and take remedial action to stop them happening a second time,” said White. “They also have to act in ways that don’t damage the evidence so that the breaches can be investigated and the offenders prosecuted.”
Human resources fraud
While the issue of misrepresenting qualifications has been a major concern in the public sector recently, the survey also revealed that it is a significant problem in the private sector as well. Of the organisations that reported incidents of human resources fraud, 69% indicated that this related to false qualifications.
For White, this indicates that it is a problem that is not being properly addressed.
“Human resource fraud in the private sector is being hushed up,” White said. “They don’t want people to know they are employing unqualified individuals, so these offenders are never prosecuted. Are businesses as a whole not prepared to take a public stand and do what is right? Only if everyone takes the same stand will we reduce it and stop it.”