The seventh edition of the PwC report, based on global statistics and released on 3 March at the PwC headquarters in Midrand, showed a surprising decline in the reported rate of economic crime. However, it warns that instances of higher-value fraud have increased considerably in South Africa and rates remain significantly higher than the global average.

Economic crime, otherwise called financial crime, refers to illegal acts committed by an individual or a group of individuals to procure a financial or professional advantage. The report noted a drop from 77% of respondents who had experienced fraud in 2018 to 60% in South Africa in 2020 – still far higher than the global average which stands at 47%.

The report brought customer fraud to the fore as a prominent economic crime, followed by bribery and corruption and financial statement fraud. These were also noted as the most disruptive crimes likely to be experienced over the next 24 months.

Between 2018 and 2020, respondents experiencing customer fraud increased from 42% to 47%, bribery and corruption from 34% to 42%, and financial statement fraud from 22% to 32%.

“This, combined with increased involvement of senior management in perpetrating such acts, has resulted in a sharp increase in the value of losses incurred as a result.” said survey leader Trevor White.

Junior management as the main perpetrators of fraud peaked in 2009 at 50%, but at present prevalence in this regard was detected in senior management, at 34%.

South Africa has moved to third in the top-10 ranking of countries with the highest reported cases in the world, with China and India reporting the highest incidences of economic crime.

Given the recent scandals rocking South Africa, both in the public and private sectors, it comes as no surprise that a fifth of respondents consider bribery and corruption to be the most serious and disruptive economic crime to affect organisations, the report states.

According to the report, the prominence of accounting and financial statement-related fraud, which has left many casualties in the past few years, has been one of the major factors prompting companies to take a cold, hard look at themselves and to reflect honestly on what is being done to counter the scourge of economic crime.

It further noted that the rise of customer fraud, which was introduced as a category in the survey only in 2018, is an indication of the erosion of the ethical fabric of society.

To neutralise this, companies were urged to perform active and robust assessment processes, to supplement their technology with the right governance structures, relevant expertise, and robust monitoring while keeping a watchful eye on the ground.

While almost 60% of South African respondents say they have policies and procedures in place that include training and monitoring, only around half of the organisations in the country are dedicating resources to risk assessment, governance, and third-party management.

In almost 60% of cases, the incidents were not disclosed to the board at all.

“Our message is clear: to survive the catastrophic impact of economic crime, organisations need to be proactive, agile and resilient, to react in an appropriate manner and to do so swiftly,” said White. DM