The 2020 Global Economic Crime and Fraud Survey, released recently by PwC, reveals some surprising facts, and some that are not so surprising.

In South Africa, the percentage of economic crime incidents was reported as having decreased from 77% in 2018 to 60% in 2020, marking the first time this figure had declined in the last decade. This should not be viewed in isolation, says PwC, because the value of these incidents has doubled in the past two years, and the level of involvement of senior management, as the main perpetrator, has jumped from 20% in 2018 to 34% in 2020. This latter figure was 15% in 2016, meaning that in four years the number of senior executives committing these types of crimes has more than doubled

Furthermore, South Africa’s overall percentage of 60% is well above the global average, which also declined slightly from 49% in 2018 to 47% in 2020.

PwC does state, though, that this year South Africa slipped to third in the top 10 ranking of countries with the highest reported economic crime in the world. In 2018 the country’s 77% overall put it at the top of the economic fraud tree.

Others in this year’s top 10 are India (69%) and China (60%) just ahead of South Africa, followed closely by Kenya (58%), the US (56%) and the UK (56%). As was the case in 2018, the African region at 58% has reported the highest levels of economic crime, followed by North America at 53% and Latin America at 49%.

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Minuscule silver lining

However, the levels of fraud awareness and insight among South African organisations are still significantly higher than in other countries, with 73% of South African respondents indicating a high or extensive knowledge in this area, compared to 65% of global respondents.

The industry hardest hit was that of financial services, with 24% of incidents involving this sector. Government and the public sector, however, were close behind at 20%, followed by technology, media and communications (16%) and consumer markets (16%). Health industries reported the smallest level of economic crime, at just 4%.

Most crimes were perpetrated by insiders (41%), with 36% being orchestrated from the outside and 21% involving collusion between internal and external actors. Organised crime was the top external factor.

Around 7% of South African respondents said they had suffered losses of more than $50-million across all incidents that occurred in the past 24 months, while 4% reported direct losses of more than $100-million for all incidents.

The most prominent type of economic crime reported in this period was customer fraud (47%) – this happens when end users commit fraud involving mortgages, cheques and credit cards, insurance claims, fraudulent use of IDs, and similar fraud types. It was followed by bribery and corruption (42%), and fraud involving financial statements or accounting practices (34%).

PwC points out that while incidences of other fraud types declined in South Africa, occurrences of the top three rose, as did cybercrime.

“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,” PwC notes.

These figures become even more of a concern when taking into account that 38% of global participants in PwC’s Annual Global CEO Survey 2020 identified China and India as the most important countries to their organisations’ overall growth prospects over the next 12 months. Only 14% of CEOs named South Africa as a growth or investment priority. “This is a matter of serious concern,” says PwC.

Corruption most disruptive economic crime

Looking ahead to the next 24 months, most respondents (19%) identified bribery and corruption as the most serious and disruptive economic crime which could affect their organisations.

In addition, almost half the companies surveyed were themselves accused of bribery and corruption specifically, and nearly one in five respondents reported that their organisations had been accused of some kind of economic crime in general.

In the past 24 months, 42% of South African respondents – compared to 29% globally – say they have been asked to pay a bribe in the course of doing business. “Add this to the 44% who believe they have lost an opportunity to a competitor who paid a bribe, and you realise how dismal the situation is,” says PwC.

“Considering the increased reported prevalence of these kind of incidents since our 2018 survey, swift and decisive action needs to be taken.”