Economic crime on the rise, says survey
November 02, 2007 | BY
clpstaff &clp articlesIncidents of economic crime in Hong Kong have increased by 4% to 26% since 2005, according to PricewaterhouseCoopers¡¦ (PwC) 2007 Global Economic Crime…
Incidents of economic crime in Hong Kong have increased by 4% to 26% since 2005, according to PricewaterhouseCoopers¡¦ (PwC) 2007 Global Economic Crime Survey: Hong Kong, which was released October 16 2007. The survey was based on the responses of executives of 100 companies selected at random from a wide variety of industries in Hong Kong.
The average direct financial losses to Hong Kong respondents were US$618,000, says PwC. Respondents reported spending on average an additional US$60,000 on managing these cases, which includes legal costs, investigation costs and stakeholder management. Sixty percent of those that experienced economic crime stated they had suffered collateral damage or significant collateral damage to their businesses above and beyond the monetary losses.
The survey also looked at the experiences of Hong Kong and other global companies in emerging markets including China. Of the Hong Kong respondents that had responsibility for business activities in China, 29% reported they were victims of economic crime in those businesses in the past two years, while 11% consider it likely or very likely they will be subjected to economic crime over the next two years in China. Both figures are higher than the Hong Kong domestic results.
While the average direct financial losses reported by respondents in respect of China businesses were very similar to those in Hong Kong, the average cost of managing economic crime cases in China for global respondents was more than eight times that experienced for cases in Hong Kong.
Despite the perceptions of heightened risk in China, only 52% of Hong Kong respondents with China responsibility reported having introduced new control measures or strengthened existing control measures in China.
¡§Despite the overall level and increases in reported economic crime, Hong Kong companies continue to be too complacent,¡¨ says John Donker, a PwC partner and leader of the firm¡¦s investigations and forensic services practice in China and Hong Kong. ¡§Only 4% of the companies surveyed believe it is likely or very likely that their company will be the target of fraud during the next 2 years.¡¨
Globally, the study found that no industry is immune to fraud. Fraud was most prevalent in the insurance and retail sectors, where 57% of companies reported fraud, followed by the government and the public sector, with 54%, financial services, 46%, and automotive, 44%. The types of fraud most common to each industry, varies due to their unique operating characteristics.
Theft was the most common type of fraud, reported by 30% of those who said they had experienced economic crime. Intellectual property infringement was reported by 15%, corruption and bribery by 13%, accounting fraud by 12%, and money laundering by 4%.
¡§Globally, bribery and corruption remains a key concern of companies with 24% of respondents reporting that they believed they lost an opportunity to a competitor whom they believe may have paid a bribe,¡¨ says Donker. ¡§Concern is particularly high in respect of fast developing emerging economies with 30% of Hong Kong companies surveyed considering that corruption and bribery was the most prevalent economic crime in China.¡¨
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