Kroll publishes an annual fraud report - we commented on the prior year edition here, and the new document is available from Kroll's website. Data was prepared in conjunction with the Economist Intelligence Unit.
As always, this is an interesting read, and we particularly agreed with the comments provided in the introduction:
"Fraud, corruption, and all that go with it may not have precipitated recession, but they certainly made its impact all the more painful. Losses, prosecutions, litigation, bankruptcies, were all sparked or exacerbated by the actions of groups or individuals in the years before; actions that went undetected and unpunished until too late.
The conventional wisdom is that fraud goes up in a recession. That isn’t necessarily true, as our survey shows. What goes up is the discovery of fraud, not always the same thing. Just like legitimate businesses, fraudsters are threatened by loss of income or the financial weakness of their businesses; Ponzi schemes are especially vulnerable. But other fraudulent areas – management conflict of interest, corruption, employee theft – also come to light when business conditions sour.
The data we have collected this year clearly highlights the industry hardest hit by fraud and wrongdoing: financial services. Over half of the respondents in this sector reported that the global financial crisis had increased levels of fraud at their companies – the highest figure for any industry.
Nearly 90 percent of firms reported being victims of some kind of fraud in the last three years. This sector also had the second highest proportion suffering from each of internal financial fraud and management self-dealing.
Unfortunately, though, over one in five financial services companies saw their internal controls weakened through cost cutting. It is understandable that in today’s climate, they should seek economies. But these will be false economies over the longer term if they lead to the resurgence of the same issues that so deeply damaged the industry in 2008-9.
“Tighter controls” will not be a popular rallying cry in Wall Street, the City or Nariman Point. The associated costs can be hard to bear in difficult times – but the cost of non-compliance can be harsher."
Exactly.
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