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Economic crime remains prevalent in Mideast

DUBAI, March 23, 2016

Around 26 per cent of organisations in the Middle East have experienced economic crimes in the past 24 months, lower than the global average of 36 per cent though a 5 per cent increase since 2014, a report said.

 Although the number of affected organisations in the Middle East was lower compared to the global average, the number in the region who simply didn’t know if they’d been a victim was much higher than the global average (20 per cent against 11 per cent), indicating uncertainty as to whether their organisations are experiencing economic crime, according to the report titled “Adjusting the Lens on Economic Crime in the Arab World” from PwC,  a global network of firms providing assurance, advisory and tax services.

The report illustrates how economic crime has evolved over the last two years, morphing into different forms depending on industrial sector and region.

“The challenge for businesses is to close down the opportunities to commit economic crime. A major part of this is staying ahead of new threats, while developing new ways to prevent, detect and respond effectively to those threats,” said Nick Robinson, PwC Regional Forensic Services leader.

“It’s also vital to ensure that organisations have a culture based on strong values, supported by robust policies and ethics and compliance programmes. This needs to be integrated into day-to-day decision-making to be successful.”

The survey shows that even though there has been a marginal decrease, it is possible that this small decrease is actually masking a worrying trend – that economic crime is changing significantly, but that detection and controls are not keeping up with the pace of change. Further, the financial cost of each fraud is on the rise.

According to the survey, one in four organisations have not carried out a single fraud risk assessment in the last 24 months, while 17 per cent are discovered by mere accident. This suggests that organisations need to ensure that they are not lulled into a false sense of security if the level of reported incidents are low and that they revisit their fraud detection mechanisms.

However, on a more positive note, the survey highlights that the role of internal audit in detecting fraud has been more effective compared to how it was in 2014, despite it being slightly below the global average.

Tareq Haddad, PwC Partner, Middle East Investigations leader said: “It takes continuous efforts to combat the persistent issue of economic crime. Over the year it has been proven that managements who have put in place strong anti-fraud programmes have preserved the value and reputation of their organisations and gained the trust of stakeholders through demonstrating its ability to deal with such complex issues.”

“Such programs must include a proper fraud risk assessment and putting effective mechanisms in place to deter, prevent and detect fraud. Furthermore, an organisation’s reaction to fraud incidents and continuous improvement of its systems over time is key to mature its abilities to manage the risk of fraud,” he added.


Additional key highlights of the report include:

•    Cybercrime: 30 per cent organisations have been affected so far and 39 per cent think they will be affected in the next two years. Cybercrime remains the second most reported economic crime.

•    Response to cybercrime: Most companies are still not adequately prepared for or even understand the risks faced. Only 33 per cent organisations have a cyber-incident response plan.

•    The fraudster profile: Most likely, a fraudster in the Middle East is in middle management (29 per cent) or a junior role (46 per cent). Types of fraud more prevalent in the region include misclassification of payroll expenses, false wage claims and fraudulent reductions in payroll taxes.

•    Anti-money laundering: More than 20 per cent of financial services firms have not conducted risk assessments across their global footprint. However, Middle Eastern respondents appear to be ahead of the curve in many areas and in the last two years, 68 per cent have hired additional resources in this area.

•    Ethics and Compliance: More than one in five respondents are not aware of a formal ethics and compliance programme, even though 79 per cent companies claim to have a formal plan in place. The report also suggests that a good compliance programme should be embedded in the HR processes in order to combat economic crimes and that, if done well, this approach can reduce such cases, as well as protect the brand and reputation.

Further interesting messages from the survey are around bribery and corruption, with 92 per cent of the respondents in the Middle East saying they don’t see bribery as a legitimate practise in their organisation, and 83 per cent of them saying they would rather lose a sale than pay a bribe. While Only 6 per cent say they’ve been asked to pay a bribe in the last two years, and only 9 per cent say they lost business to a competitor as a result.

The good news is that, according to Transparency International’s Corruption Perception Index for 2016, a number of the major economies in the region have made progress in this area, with the ratings for Kuwait, Jordan, and Saudi Arabia all improving slightly, the report said.

There has been little progress elsewhere in the region: Egypt, Libya, Morocco, Syria, and Tunisia have deteriorated slightly, and three of the bottom ten countries are from the region, namely Iraq, Libya, and Sudan, all of them are countries affected by conflict. – TradeArabia News Service




Tags: Middle East | PWC | Cybercrime |

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