By Andy Sambidge
Indicates "widespread lack of effective fraud detection methods" a report concluded
Reported cases of economic crime fell in the Middle East despite an increase globally, but only five percent are being detected by auditors, according to the PwC 2014 Middle East Economic Crime Survey.
While business-related offences rose globally to 37 percent, the Middle East figure fell to 21 percent, representing a seven percent drop since 2011.
However, when asked about the future trend of economic crime more than 38 percent of respondents in the Middle East indicated that they expect their organisations to suffer over the next 24 months.
The direct financial impact on businesses due to these crimes remains relatively high with 12 percent of respondents reporting a financial impact greater than $5 million over the past two years, half of which reported losses above $100 million.
The survey showed that the most common type of economic crime reported in the Middle East was asset misappropriation, followed by cybercrime, bribery and corruption, and accounting fraud.
When asked if organisations had been asked to pay a bribe, nearly one fifth answered positively and nearly one quarter felt their organisation has lost an opportunity due to a competitor paying a bribe.
PwC’s survey also reported significant levels of other crimes including procurement fraud, human resources fraud and money laundering.
Respondents also reported a significant non-financial impact on businesses - with 41 percent considering damage to employee morale the most significant collateral impact rather than the more commercial factors.
John Wilkinson, PwC partner and leader of PwC’s Middle East Forensic Services team, said “Economic crime is a risk that threatens development at a national level. It impacts the welfare of people across the region and stifles economic growth."
According to its 2014 findings, only five percent of frauds were detected by internal audit, with 22 percent detected by tip-offs and 16 percent detected by chance, indicating a "widespread lack of effective fraud detection methods in the Middle East".
Wilkinson added: "We believe the shortfall in effective fraud prevention and detection leads to a substantial deficit in the knowledge of economic crimes actually being committed.
“Economic crime in the region still continues to be a significant threat, affecting large and small organisations. Every industry or company in the region is susceptible to the impact of fraud. Looking forward, CEOs and executive management tell us that they are significantly concerned about the risks of cybercrime and that bribery and corruption remains a pervasive threat.”
The results of the survey identified that 21 percent of respondents had suffered at least one instance of economic crime in their organisations.
This rate of reported incidents is lower in the Middle East than anywhere else in the world, despite several Arab Countries in the Middle East being perceived to have high levels of corruption, according to Transparency International’s Corruption Perceptions Index.
The 2014 Middle East Economic Survey was completed by 232 respondents from nine Arab countries in the region.
This region, has a surface painted with glamorous buildings and events. It certainly attracts the world. But according to this survey, it surely shows that malpractices in businesses are common.
No doubt, governments have to bail out organizations by writing off there debts.
Its a sorry situation as like any other country worldwide. The core problem is to have extra ordinary profits, regardless of what ever malpractices have to be exercised.