Fraud and the Financial Crisis

1 Septembrie 2011

KPMG ROMÂNIA S.R.L.

It has been observed that fraud has a tendency to bubble to the surface more frequently during times of recession than during times of growth. KPMG’s Forensic practice surveyed managers in organizations across seven countries in Central and Eastern Europe (CEE) in order to find out more about the relationship between fraud and the recent financial crisis.

INCREASES IN DETECTED FRAUD

In most countries approximately half of those surveyed said that there had been an increase in fraud detected in their organization during the past two years. Bucking this trend, less than 10% of Czech respondents noted an increase in detected fraud. 58% of Romanian participants have detected an increase in the incidence of fraud cases in their organization.

The most common business areas where increases in detected fraud were noted are sales (64% in CEE, 86% in Romania), purchasing (41% in CEE, 57% in Romania), inventory management (32% in CEE, 57% in Romania), and asset management (27% in CEE).

There was no clear pattern in the types of fraud where an increase in detected cases was observed, but the most common types were conflicts of interest and collusion with business partners (45% in CEE), theft or leakage of sensitive information (45% in CEE, 43% in Romania), fraudulent disbursement (41% in CEE, 43% in Romania), misuse of sales incentives schemes (41% in CEE, 57% in Romania), and bribery and corruption (43% in Romania). Most of these are traditionally among the most prevalent forms of fraud, but it is interesting to see leakage of information featuring so highly among responses: it provides perhaps some evidence of the heightened value of commercial information during a time when the market conditions are tight.

RESPONSES TO INCREASES IN DETECTED FRAUD

Where increases were detected they were universally addressed through some action: all organizations conducted internal investigations, many took steps to better manage fraud risks (86%), discipline staff for their involvement (77% in CEE, 86% in Romania) or assess the value of the loss (77% in CEE, 100% in Romania). In a majority of cases (59% in CEE, 71% in Romania) fraud was also addressed by formal legal action. Many companies (41%) also used external advisors to assist them in responding to fraud. Responses did vary between countries. For example, organizations in the Czech Republic were particularly anemic in their response to increases in detected fraud: other than investigation only 50% of those facing increases in fraud undertook any other follow-up actions.

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