the sixth annual economist intelligence unit global fraud survey

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  1. 1. Annual Edition 2012/13Global Fraud ReportEconomist Intelligence Unit Survey ResultsThe biggest threat comes from withinThe battle against information theft remains a leading focusComplacency may be the next biggest dangerAnti-corruption measures are reaping rewards
  2. 2. About the researchThe Annual Global Fraud Survey, commissioned by Kroll AdvisorySolutions and carried out by the Economist Intelligence Unit, polled839 senior executives worldwide from a broad range of industriesand functions in July and August 2012. Where Economist IntelligenceUnit analysis has been quoted in this report, it has been headlinedas such. Kroll also undertook its own analysis of the results.As in previous years, these represented a wide range of industries,including notable participation from Financial Services andProfessional Services; as well as Retail and Wholesale; Technology,Media, and Telecommunications; Healthcare and Pharmaceuticals;Travel, Leisure, and Transportation; Consumer Goods; Construction,Engineering, and Infrastructure; Natural Resources; andManufacturing. Respondents were senior, with 53% at C-suite level.Over half (52%) of participants represent companies with annualrevenues of over $500m. Respondents this year included 28% fromEurope, 26% from North America, 24% from the Asia-Pacific region,13% from Latin America and 10% from the Middle East/Africa.This report brings together these survey results with the experienceand expertise of Kroll and a selection of its affiliates. It includescontent written by the Economist Intelligence Unit and other thirdparties. Kroll would like to thank the Economist Intelligence Unit,Dr. Paul Kielstra and all the authors for their contributions inproducing this report.Values throughout the report are US dollars.
  3. 3. ContentsGlobal Fraud ReportContents Introductionregional analysis: Asia-Pacific Tom Hartley, President and Chief Executive Officer............................................. 4 China overview........................................................................................................................ 35 Proving staff kickback allegations: How to gather evidence efficiently..... 36 Economist Intelligence Unit Overview Preventing IP fraud: The better option....................................................................... 38 Survey results......................................................................................................................... 5 India overview.......................................................................................................................... 40 fraud at a glance Procurement fraud in India: Overcoming a widespread problem.............. 41 Beware the enemy within................................................................................................... 9Challenges facing emerging market corporations expanding abroad...... 42 A geographical snapshot.................................................................................................... 10Indonesia overview............................................................................................................... 44 Dealing with trade secret issues.................................................................................... 45 regional analysis: Americas United States overview....................................................................................................... 12regional analysis: emea Securing your company from cyber crime............................................................... 13Europe overview..................................................................................................................... 47 Straight talk on due diligence......................................................................................... 16Bank collapses amidst mismanagement & fraud................................................ 48 Preparing for new US AML rules: Organized crime penetration in Italian and European businesses............. 50 Know your customers and who owns them........................................................... 17 Russia overview....................................................................................................................... 52 Canada overview.................................................................................................................... 19Russias undisclosed silent partners: Knowing who youre dealing with......53 Due diligence is essential and can be moreThe Gulf States overview.................................................................................................... 54 time and cost efficient than you think....................................................................... 20 Kingdom of Saudi Arabia: Time to bridge the perception gap..................... 55 Latin America overview...................................................................................................... 22 Africa overview........................................................................................................................ 57 Risk factors in Latin American agribusiness............................................................. 23 African fraud: Understanding the risks....................................................................... 58 Brazil overview......................................................................................................................... 25 The case for strengthening internal controls.......................................................... 26 sector summary Mexico overview..................................................................................................................... 28 Summary of sector fraud profiles.................................................................................. 61 Mexicos anti-money laundering challenges........................................................... 29 Contacts Top executives: A culture of fraud on the rise....................................................... 31 Key regional contacts at Kroll Advisory Solutions................................................ 62 Colombia overview................................................................................................................ 32 Vendor and procurement fraud in Colombia........................................................... 33 Economist intelligence unit Industry analysis Technology, Media & telecoms............................................................... 15 Natural resources................................................................................................ 24 Manufacturing........................................................................................................... 27 Consumer goods....................................................................................................... 37 Retail, Wholesale & Distribution...................................................... 43 Professional services........................................................................................ 46 Financial Services................................................................................................... 49 Construction, Engineering........................................................................ 56 & infrastructure Healthcare, Pharmaceuticals................................................................ 59 & Biotechnology Travel, leisure & transportation.................................................... 60Annual Edition 2012/13 | 3
  4. 4. IntroductionIntroduction On the one hand, fraud is down globally. Complacency may be the next biggest The proportion of companies that suffered danger. Our survey suggests that any an incident declined from 75 percent last company can be a victim of fraud, however year to 61 percent in the current survey. the data show that concerns about fraud This surely reflects the efforts of companies are abating as the prevalence declines. to actively manage their fraud risk. However, In our experience, letting down ones fraud is anything but defeated, with theguard can have dire consequences. most common frauds, theft of physical Companies must remain vigilant as the assets and information theft (reported by methods and tools employed by fraudsters 24 percent and 21 percent of companiescontinue to evolve. respectively), remaining stubbornly persistent Anti-corruption measures are reaping and widespread. rewards. Companies are making gains The data we collected this year highlight through robust efforts to combat bribery some points of particular note: and corruption. Half of our respondents have monitoring and reporting systems to The biggest threat comes from within.assess risks on an ongoing basis; train Fully two-thirds of firms in our survey that their senior managers and other were hit by fraud during the past year representatives to become familiar and cited an insider as a key perpetrator, rising compliant with the US Foreign Corrupt from 60 percent last year and 55 percent inThis sixth edition of Kroll Advisory 2010. Partly, this reflects the ease with Practices Act and UK Bribery Act; and include a review of these laws in their dueSolutions Global Fraud Report,which employees, agents or other company diligence, when considering an acquisition, representatives can access confidentialprepared in cooperation with corporate information. But it also suggests joint venture or providing financing.the Economist Intelligence Unit, that anti-fraud energies have beenThroughout the 40-year history of Kroll, our directed to putting up fences to protectmission has been to help clients achieve aprovides both heartening and from external threats which can sometimes deeper understanding of the underlying factssobering news for businesses be easier to address than facing the realityin a range of situations and to assist with of the threat from