The prevalence of economic crimes in the country has decreased from 75% to 58% in the last two years but it is still higher than the global average of 47%. This is according to the 2020 PwC Global Economic Crime and Fraud Survey (GECS) report.
While launching the report PwC’s regional senior partner in Eastern Africa Mr. Peter Ngahu said overall, the prevalence of economic crimes in Kenya has decreased with 58% of the respondents indicating that they have experienced some form of economic crime in the last 24 months down from 75% reported in 2018. This figure is higher than the global average of 47%, which also saw a reduction from 2018 where the rates reported were 49%.
“Economic crimes are of interest to all of us as they have an impact on businesses and the lives of citizens directly or indirectly. It’s clear from this report that economic crimes continue to be of concern for organizations of all sizes, across all regions and in virtually every sector ,” Ngahu said.
The report draws insights from experiences, perceptions and knowledge of crime from 102 respondents. These respondents are board members and senior managers who are part of executive management, finance audit risk management and other core functions in large, medium and small organizations. Of the 102 respondents, 21% represented listed companies, 35% private organisations, 19% government/state-owned enterprises, 15% non-governmental organizations and 4% private equity funds.
The decreased incidence rate, especially in the context of the current economic environment, provides an opportunity to reflect more on the impact of economic crimes on Kenyan organizations as well as businesses around the globe. The levels of awareness are increasing and many organizations are adopting a proactive approach to tackling the vice which continues to morph and evolve.
Speaking at the function, PwC’s Eastern Africa advisory and forensics services leader, Mr. Muniu Thoithi observed that it was encouraging to note that 70% of the respondents had invested in programmes to combat bribery and corruption. “The deliberate investments in anti-bribery programmes may be paying off given the ability of organisations to detect and report this vice,” said Thoithi.
In terms of the monetary cost associated with incidents of economic crime, at least a third of the Kenyan respondents that reported having experienced at least one form of economic crime in the survey period suffered losses in excess of Kshs. 10 million, up from 23% in the 2018 survey. This is an indication that fraudsters are getting bolder and economic crime is getting costlier.
In 2020, responses from Kenya showed that most perpetrators of economic crimes in the last 24 months were internal actors at 36%, while external actors accounted for 27%. This is consistent with past surveys where the main perpetrators of economic crimes have been internal actors. Moreover, one in three respondents reported being victims of collusion between the internal and external actors. In other countries where the survey was conducted, external fraudsters were the main perpetrators of fraud.
The results of the survey showed that bribery and corruption as well as procurement fraud were the most prevalent, the most costly and disruptive types of economic crimes experienced by organisations in Kenya. Reported incidences of bribery and corruption rose from 30% in 2018 to 42%, while reported incidences of procurement fraud rose from 34% in 2018 to 39% in 2020.
Mr. Muniu also observed that eight in every ten of the respondents reported having suffered economic crime conducted forensic investigations, 63% instituted disciplinary proceedings and/or terminated services of the implicated employees while 61% implemented enhanced internal controls.
“This is very encouraging and goes to demonstrate that Kenyan organisations are employing important strategies aimed at combating the threat of economic crime”, said Thoithi.
The report further adds that customer fraud is on the rise globally and remains high in Kenya. It is especially prominent in the financial services and consumer market segments. Insurance companies and banks bore the brunt of reported customer fraud globally. Customer fraud and cybercrime were the most disruptive forms of economic crimes globally.
“Organisations are increasingly inviting third parties as vendors for outsourced services. This has led to an increase in the threat of frauds driven by third parties, especially technology driven frauds, giving these organisations sleepless nights”, said Ngahu.
To counter this increased threat of external and technology driven frauds, organisations have been investing in disruptive fraud fighting technologies and the survey found that more than half of the respondents found communication and transactions monitoring to be of greatest value while a third of those that reported using artificial intelligence (AI), noted biometric authentication as the most widely and beneficial AI technology in fighting crime.
Globally, the 2020 GECS Report analysed feedback from over 5,000 stakeholders in the economic sectors of focus across 99 territories, making it one of the largest and most comprehensive surveys on economic crimes.