India Inc sees a rise in frauds: EY’s India Fraud Survey
Key Highlights of EY’s India Fraud Survey 2012
- Incidence of frauds has significantly increased; nearly 3/5th of the respondents’ companies have been subjected to fraud in the last one year
- Data or information theft and IP infringement rank No. 1 among the top 5 frauds in the country
- A typical fraudster today is a middle management employee in his 30’s who is very ambitious and tech savvy generally from the procurement or sales department of companies
- Majority of the companies are reluctant to take legal recourse against fraud perpetrator
- Loss of reputation emerged as the most impactful collateral damage caused by fraud
- Weak anti-fraud measures: companies still rely on traditional anti-fraud measures
Mumbai, 5 March 2012 –The spate of scams unearthed recently has raised anxiety in the minds of the foreign investors who are looking to be a part of India’s growth story. EY India’s Fraud Investigation & Dispute Services (FIDS) team released a report titled ‘Fraud & corporate governance: Changing paradigm in India’ based on the India Fraud Survey 2012.
The study aims to understand how businesses have coped with increasing fraud and corruption risk last year, changing profile of a fraudster, what are the emerging fraud risks and the measures taken by the various organizations to mitigate these risks.
Speaking on the survey, Arpinder Singh, Partner & National Director – FIDS, EY India said, “Although India, witnessing rapid economic growth, is an attractive destination for foreign investors, they are wary of fraud, bribery and corruption risks. With Governments across the world introducing stringent anti-corruption legislation, Indian policy makers are also taking robust steps to enhance investor confidence, corporate and public. We have taken our study beyond the fraud scenario in the country to understand the profile of a typical fraudster in today’s world.”
The survey also revealed that apart from banking, Non Banking Financial Companies (NBFC), real estate and telecommunications that are generally perceived to be fraud prone, around 50% industries like infrastructure, IT/ITES and consumer products also saw a significant increase in incidence of frauds. Besides, data or information theft and IP infringement ranked no. 1 among the top 5 frauds in the country
The survey describes the changing profile of a typical fraudster today. The motive of committing a fraud now has shifted from “need” to “greed” making the perpetrator perform fraud to support opulent lifestyle. A typical fraudster today is in his 30’s, generally from the middle management of a company. He/she is ambitious and comfortable with technology, sitting at a remote location generally working in the procurement or sales departments of companies.
“A proactive approach to fraud risk management is the need of the hour. Technology and a robust whistle-blowing mechanism can play a large role in mitigating these risks. A positive sign is regulatory activism increasing in India with regulators proposing more stringent standards for prevention, detection and reporting of fraud” said Mr. Singh.
Given the changing regulatory scenario, more and more companies are increasing their focus on corporate governance. According to the survey, majority of frauds in companies were surfaced because of the whistle-blowing mechanism followed by internal audit/ corporate security. “Today, we see a rise in the number of companies wanting to incorporate proactive fraud risk management in their companies as compared to a year ago. This is an encouraging sign and indicates a brighter future for corporate governance in India”, added Mr. Singh.
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