Fraudsters target 83% of SA companies

29 November 2005

Julius Cobbett

Fraud is rampant among South African companies, according to a biennial crime survey conducted by PricewaterhouseCoopers (PwC). Since 2003, 83% of South African companies said they had fell victim to economic crime. The figure is higher than the 73% reported during the previous two-year period.

The survey is a global initiative that interviews senior executives of 3 643 companies from 34 countries around the world. In South Africa, 100 major companies or organisations were interviewed.

Louis Strydom, National Leader: PwC Forensic Services, believes the statistics are a positive sign. He says they indicate tighter regulation, increased focus on internal controls and more transparent reporting.

Segmental analysis shows that the greatest prevalence of economic crime occurs in corruption and bribery at 41% of total. Asset misappropriation is second at 40%, with financial misrepresentation in third place at 10%.

Of the companies polled, 15% reported tangible financial losses as a result of fraud between $1m and $10m (R6,5m-R65m).

According to Strydom, people do not commit fraud to put food on their tables, but mostly to maintain lavish lifestyles. He also says that the majority of perpetrators are not even aware that they are doing anything wrong. “People believe it’s their right to misappropriate assets,” laments Strydom.

The survey found that the typical South African fraudster is male, between 31 and 40 years of age and relatively unqualified, with a matric or lower. Only 20% of fraud perpetrators are female.

Strydom says that the most effective way of catching fraudsters is through internal controls. But he says that the greater challenge lies in enforcing controls, rather than implementing them.

Convicted fraudster turned motivational speaker Brad Sadler agrees. Speaking at a conference earlier this year, he said that enforcement of internal controls would have prevented his crime.

Of the fraud cases reported in the survey, 24% were discovered by means of internal audit, 13% by chance and 11% through an internal tip-off.

South Africa’s sentencing rate of fraud perpetrators of 40% is higher than global levels of 29%. But Strydom says that many perpetrators walk free because legal action costs too much, takes too long and attracts too much negative publicity.

South African respondents believe they are less likely to be ripped off in the next five years. The proportion of respondents expecting no fraud to occur grew to 28% from 8% in 2003. Those who think fraud is likely to occur decreased from 59% to 46%.

Source: Moneyweb

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