Financial Data
Updated 21 Aug 2019


How to detect and prevent white-collar fraud in your business

South Africa has been ranked number one (globally) for incidences of economic crimes. Is your business effectively equipped to prevent white-collar criminal activity in the workplace?


26 March 2018  Share  0 comments  Print


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South African businesses and organisations have risen to the top of PwC’sGlobal Economic Crime Survey 2018.The survey takes place every two years and this year, 77% of the 282 local business leaders and senior executives interviewed by the business consultancy said they’ve been affected by economic crime in the past 24 months.


“Economic crime continues to disrupt business in South Africa. The latest results show a sharp increase in reported instances of economic crime at 77%, which is significantly higher than the global average rate of 49%.” –Trevor White, PwC Partner, Forensic Services and South Africa Survey Leader


The types of economic crimes affecting South African businesses

Bizconnect Embedded _WHite COllar Crime 2

  • Asset misappropriation

PwC’s survey shows that asset embezzlement remains the most prevalent form of economic crime around the world. 49% of South African respondents said they are affected by it compared to 45% of global respondents.

  • Cybercrime

South African respondents said instances of cybercrime decreased in their companies (29% in 2018 versus 32% in 2016), but the country retains its second place in the global rankings.

  • Bribery and corruption

More than a third of South African company leaders at 34% said they’ve had to deal with heightened instances of bribery and corruption in their organisation in the past 24 months.

  • Procurement fraud

Closely linked to bribery and corruption, procurement fraud reared its head in the PwC report too. 39% of South African business leaders said procurement fraud affected them compared to 22% globally.

  • Accounting fraud

South African company leaders also reported an increase in accounting fraud in their organisations from 20% in 2016 to 22% in 2018.

  • Consumer fraud

PwC added a new category of economic crime to its survey this year, covering ‘fraud committed by the consumer’. It is the second most reported economic crime in South Africa at 42%, and it takes third place globally at 29%.

How to identify the fraudsters in your business

According to Rick Crouch, a private and corporate crime investigator that’s worked in the USA and who is now working in South Africa helping companies reduce white collar crime:


“Too often I hear of business owners that have found out too late that a ‘long time trusted’ employee is suspected of stealing from the company. True, the majority of fraudsters are only identified after they have been appointed to the job, but by conducting a thorough pre-employment screening, economic fraud could be mitigated in your business.”


Crouch says that in his experience, fraudsters are usually male, aged between 31 and 40 and that they work for an employer for more than 10 years before making major fraudulent moves. “They usually have some sort of university degree too,” he adds.

Related: Why your business needs theft & fidelity protection

Forensic Services Leader for PwC Southern Africa, Trevor Hills, adds that technology is clearly a fundamental tool in the fight against fraud, but it’s not the only one.

“Ultimately, when it comes to deterring fraud, the returns from investment on people initiatives are likely to far exceed those from investing in another piece of technology,” he says.

A focus on human behaviour is said to be your best opportunity to reduce or prevent fraud, according to PwC.

5 ways you could reduce economic crime in your business

1) Know who you are hiring before you employ them

It’s advised that you get to know your employees before you even hire them. How do you do this? You conduct a thorough pre-employment screening on them. Screenings run by reputable service providers can help you detect whether potential hires have prior convictions for financial crimes.

2) Ensure employees are aware of your stance on fraud

Everyone within your business or organisation needs to be aware of your fraud risk policy, including the types of fraud you’re looking out for and the consequences associated with them.

3) Create stringent controls, especially around money and assets

It’s recommended that business leaders strategically consider and implement internal controls when it comes to cash or asset management. Segregation of accounting duties, for example, could be an effective way to reduce the risk of accounting fraud from occurring.

4) Keep an eye on your ‘hard-workers’

You may find it impressive that a particular employee hasn’t missed a day of work in for as long as you can remember. You think this person is a loyal, hard-working employee. But, this ‘dedication’ can be a warning sign that an employee might have something to hide.

Related: 5 Steps to cutting the fraud of a cash-driven society in Africa

Economic crime investigator, Crouch says these sorts of workers are concerned that someone will detect their fraud if they were out of the office for a period of time. “In my experience, too many bookkeepers are caught only when they were forced to take a vacation and a temp comes in to do their job,” he says.

5) Get some expert help in from time to time

PwC and Crouch agree that business leaders should hire fraud detection experts to assess operations on a regular basis.

“Even if you have the slightest suspicion that there is possible fraudulent activity going on in your company or if a recent burglary or asset loss just does not make sense to you as you can’t figure out how they got in or what went wrong, call an expert,” Crouch says.

The economic impact of white collar crime on SA businesses

While 53% of business leaders, globally, reported having lost less than USD100 000 to economic crime over the last 24 months, only 43% of South African organisations could make that claim.

Almost a fifth (19%) of South African respondents to the PwC survey experienced losses of between USD100 000 and USD1 million to white collar crime. Added to this, one in four respondents indicated having suffered losses of more than USD1 million, while 2% lost in excess of USD100 million – which is double the global average when it comes to white collar crime losses.

CONSIDER THIS

There are two kinds of fraud:

1)Fraud committed for personal gain (such as embezzlement, or false reporting intended to boost compensation)

2)Fraud committed for ‘corporate motives’ (such as the survival of a company, or the protection of its workforce).

Resources:

1) https://www.pwc.com/gx/en/forensics/global-economic-crime-and-fraud-survey-2018.pdf

2) https://www.pwc.co.za/en/assets/pdf/south-african-crime-survey-2016.pdf

3) http://rickcrouch.co.za/wp/business-fraud-in-south-africa/

4) https://www.ujuh.co.za/economic-crimes-are-on-the-rise-in-south-africa/

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