Over 95% Indian firms fall prey to 'new fraud' incidents

Over 95 per cent of organisations in India have experienced new types of fraud incidents in the past two years, a PwC Survey said on Tuesday.

Following the outbreak of the COVID-19 pandemic, the uncertainties associated with it, subsequent shift to digital operations and remote working, businesses have been exposed to new risks related to digital security, employee safety and disinformation, said the PwC's 'Global Economic Crime and Fraud Survey 2022' report.

"These in turn have led to new incidents of fraud: 52 per cent of Indian companies experienced fraud or economic crime in the last 24 months and an overwhelming 95 per cent of these have experienced new types of fraud as a result of the disruption caused by COVID-19," it said.

PwC's Global Economic Crime and Fraud Survey (GECS) 2022 surveyed 1,296 organisations across the world, out of which 112 were from India and represented 32 diverse industries.

It further said that nearly 67 per cent of organisations in India reported that the most disruptive incident came via an external attack or collusion between external and internal sources.

This proportion was 56 per cent in its 2020 survey.

Puneet Garkhel, Partner and Leader, Forensics Services, PwC India, said that with organisational perimeters becoming more vulnerable over the past two years, it is imperative for businesses to not only continually focus on policies, training and internal controls but also prioritise investing in sophisticated technologies to manage and mitigate the evolving nature of frauds.

"It is increasingly becoming important for organisations to understand the end-to-end life cycle of customer-facing products and also strike a balance between user experience and fraud controls.

"Over time, formidable actors become better at exploiting cracks," he said.

On the bright side, the report said companies in India have been undertaking fraud prevention measures to combat fraud, which are working – 52 per cent of Indian organisations experienced fraud or economic crime within the last 24 months, as opposed to 69 per cent in the 2020 survey.

The new types of fraud experienced by companies include misconduct risk (67 per cent), legal risk (16 per cent), cybercrime (31 per cent), insider trading (19 per cent), and platform risk (38 per cent).

Misconduct was the biggest challenge faced by organisations as bad actors began collaborating and taking advantage of pandemic-related uncertainty and volatility, it said.

Amongst organisations that reported fraud, conduct risk (or risks associated with individuals within the firm, or vendors, agents and customers) was the biggest threat at 90 per cent.

As per the report, fraud and economic crimes impact both big and small firms. However, the survey found fraud to be more prevalent among big firms.