State of computer related Economic Fraud in India Dec 2011

PWC recently released its India report “Safeguarding organizations in India against Cyber crime” as part of its Global Economic Crime Survey. Senior members from the executive management, finance, audit and compliance comprised 70% of the respondent’s from 106 companies. If we overlook the misleading title, which gives an impression of a report on cyber crime (which the report is partially about), the report actually provides an excellent insight into the state of economic frauds in Indian organizations, using computer (e.g. hacking, IP theft) or computer systems (fake/inflated expense reports, over invoicing/under invoicing) in India. Economic frauds as per the report are categorized as cyber crimes, accounting fraud, asset misappropriation and bribery and corruption.

The important observations, I made on reading the report were:

a)  There is heightened awareness among Indian Management about cyber crimes which involve reputational damage, IP theft, financial losses, regulator risks, and service disruption. We were 30% above the global average which is a sign on our economic environment becoming cyber aware. Positive news!

b)  Fraud Management seemed statistically to provide the most value in reducing economic crimes, but the demand for this services was low due to its perceived lack of value, cost or limited understanding of the service. Since fraud management requires cultural change and increase system or monitoring costs, companies may be reluctant to invest

c)   Cyber security training seems to have declined with 35% of the respondents having received no training at all. Not a good sign!

d)   12% of the respondents were victims of fairly large crimes of over 5 m$. An eye opener!

e)   The most common methods of dealing with cases of fraud against employees was dismissal and warnings and with outsiders, severance of business relationship and use of law enforcement

In the overall analysis, there is a rise in cyber crime risk awareness but little investment in fraud investment, fraud management and cyber security awareness. The report is a must read. It is well articulated and perhaps the only repetitive survey of economic crime in India.