Over 95% of firms in India faced 'new frauds’

There has been Rise in external fraud post COVID. Over 95% organisations in India have experienced ‘new fraud’ incidents in the past two years as per PwC Survey

Following the outbreak of the COVID-19 pandemic, uncertainties associated with it, and the subsequent shift to digital operations and remote working, businesses have been exposed to new risks related to digital security, employee safety and disinformation. These in turn have led to new incidents of fraud.

52% of Indian companies experienced fraud or economic crime in the last 24 months and an overwhelming 95% of these have experienced new types of fraud as a result of the disruption caused by COVID-19. It is as per the report of PwC on the Global Economic Crime and Fraud Survey 2022: India Insights.

Nearly 67% of organisations in India that experienced fraud reported that the most disruptive incident came via an external attack or collusion between external and internal sources. This proportion was 56% in the 2020 survey.

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

Experts predict 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.

The new types of fraud experienced by companies include misconduct risk (67%), legal risk (16%), cybercrime (31%), insider trading (19%), and platform risk (38%). Misconduct was the biggest challenge faced by organisations as bad actors began collaborating and taking advantage of pandemic-related uncertainty and volatility.

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%.

Fraud and economic crimes impact both big and small firms. However, the survey found frauds to be more prevalent amongst big firms: 60% of companies surveyed in India having global annual revenues above $1 billion experienced fraud during the past 24 months (globally, 52% of organisations with revenues over $10 billion experienced fraud).

The impact on smaller companies was less extensive as only 37% of companies in India with global annual revenues below $100 million experienced fraud during the past 24 months (global: 38%).

Indian organisations are facing multiple emerging risks that have the potential to cause greater disruption in the coming years. Supply chain fraud also has the potential to cause greater disruption in the coming years – 19% of organisations experienced it in the last 24 months.

Organisations also experienced increased risk due to customer fraud (30%) and KYC failure (22%) as a result of disruption caused by COVID-19. Globally, these percentages were much lower – 17% for customer fraud and 10% for KYC failure. With an increase in digital banking and payments, KYC fraud is another emerging risk that organisations need to watch out for.

Dr. Deepak Kumar Sahu, President & CEO, VARINDIA