Corporate India is relying heavily on ethics and code of conduct to help curb rising economic crime in the country.
Tangible preventive and corrective measures such as risk management systems are seen as secondary.
This explains why less than seven per cent of economic crimes in the country have been detected by risk management systems as compared to 17 per cent in the Asian-Pacific countries, and 26 per cent across the globe.
PricewaterhouseCoopers in its Economic Crime Survey pointed to this worrying factor, which "suggests that Indian companies are placing too little attention on the development of effective controls and alternative checks and balances."
At the same time, while corporates prefer to depend on ethics, they have taken insurance cover against theft by employees or third parties.
"The practice of insuring against other kind of economic crime does not appear to be prevalent," said PwC executive director Ashwani Puri.
This is likely on account of domestic firms perceiving greater risk of economic crime due to employees or third parties.
Further, many have propensity to accept certain crimes as customary business risk, while others may not be aware the availability of certain insurance products in the Indian market, he added.
Puri told Business Standard: "Our experience shows that while intangible tools have an important role, they are effective deterrents only in combination with more tangible pragmatic tools such as robust risk management systems, pre-employment screening, specific fraud detection training and established whistle-blowing systems."
Thirty-seven per cent of businesses worldwide suffer from economic crime, with an average loss of over $2 million, states the PwC report.
The world's highest levels of economic crime were reported in Africa (51 per cent) and North America (41 per cent). In India 24 per cent of corporate respondents have experienced economic crime over the last two years.
PwC's Global Economic Crime Survey 2003 was undertaken in association with Wilmer, Cutler & Pickering (USA) to assess the nature and impact of fraud worldwide.
The study is based on 3,600 interviews (of which, 85 were in India) in 50 countries with CEOs, CFOs and those responsible for detecting/preventing economic crime.
The findings of the survey show that companies are most at risk from fraud. Larger companies with more than 1,000 employees are most vulnerable to fraud.
Against 52 per cent of fraud incidences taking place in large companies in the past two years, only 37 per cent was reported by smaller companies.
There is higher incidence of economic crime in large companies, which have invested in unfamiliar overseas markets and where there is devolution of management control.
Maximum incidences of fraud have been from financial services companies than any other industry. One in six banks, for example, reported uncovering money laundering during the previous two years.
Improved control and compliance systems, as well as ongoing efforts to raise awareness of money laundering, led to higher detection rates.
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