35 pc Indian companies victims of economic crime

Nearly 35 per cent of the organisations surveyed in the country have reported that they were victims of some form of economic crime in the past two years, according to a survey.

However, there is a significant decrease in reported incidents since 2005 when 54 per cent of Indian organisations reported suffering from economic crime, said PricewaterhouseCoopers' 2007 Global Economic Crime Survey.

"This decrease may not necessarily mean that companies in India are more successful in combating fraud than their global counterparts. The decline may be attributed to higher tolerance for fraud or general perception that certain types of fraud are inherent," PricewaterhouseCoopers Advisory Leader Ashwani Puri told media persons in New Delhi.

The average direct financial loss to companies was Rs 6 crore during the period, said the survey.

In addition to the direct financial costs of fraud, companies also reported suffering significant collateral damage to the day-to-day operations and success of their businesses.

"The cost of economic crime in India is significant, which is also evident from some of the large frauds experienced by the country in the last two years," said Puri, adding, "Additionally, average cost

to manage economic crime in India is close to double as compared to global averages."

The biennial survey covered 152 organisations in India and over 5,400 globally and was conducted in association with Germany's Martin-LutherUniversity. The survey showed that nearly 50 per cent of the cases of fraud were detected by chance.

"This shows that existing controls alone are not enough to take full advantage of the deterrence mechanism that a pro active management can create within its organisation," Puri said.

The survey entitled, Economic Crime: People, Culture and Controls found that economic crime is all but universally affecting companies of all sizes and in all industries.

"The fraud is pervasive and refuses to go away despite huge investment, vigil and pressure to curb crime," Puri said.

Asset misappropriation, corruption and bribery continued to be the most common type of fraud, reported by 20 per cent of respondents in each type. Infringement was reported by 14 per cent, accounting fraud by 11 per cent, and money laundering by only one per cent.

"The most common motives for fraud are simple-need and greed. Opportunities for fraud arise as a result of a weak control environment in an organisation," he said.