PWC survey indicate a decline in economic crimes in Kenya as losses hit Ksh 5.5bn
PricewaterhouseCoopers (PWC) has today released the 2020 Global Economic Crime and Fraud Survey (“GECS”) report. The report analyses 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 in the world.
In Kenya, the report draws insights from the experiences, perceptions and knowledge of economic crime from 102 respondents. The 102 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 organisations. Of the 102 respondents, 21% represented listed companies, 35% private organisations, 19% Government/State-owned Enterprises, 15% Non-governmental organisations and 4% private equity funds.
“Economic crimes are of interest to All of us, as they have an impact on businesses and the lives of citizens either directly or indirectly. It’s clear from this report that economic crime continues to be a concern for organisations of all sizes, across all regions and in virtually every sector”, said Peter Ngahu, PwC’s Regional Senior Partner in Eastern Africa.
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%.
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 organisations as well as businesses around the globe. The levels of awareness are increasing and we note that many organisations are adopting a proactive approach to tackling the vice which continues to morph and evolve.
“We continue to see heightened risk emanating from third-parties including customers, agents, intermediaries and vendors / service providers. Of concern is the fact that half of the companies
surveyed reported not having a mature third-party risk management programme.”, said Muniu Thoithi, PwC’s Eastern Africa Advisory and Forensics Services Leader.
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 10 million Kenya Shillings, 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% with external actors accounting for 27% of the reported incidences. This is consistent with past surveys where the main perpetrators of economic crimes have been internal actors. We also note that one in three respondents reported being victims of collusion between the internal and external actors. It goes against what our respondents reported globally where external fraudsters were the main perpetrators of fraud.
The results of the survey showed that Bribery & Corruption and Procurement Fraud were the most prevalent as well as the most costly and disruptive types of economic crimes experienced by organisations in Kenya. Reported incidences of Bribery & Corruption rose from 30% in 2018 to 42%, while reported incidences of Procurement fraud rose from 34% in 2018 to 39% in 2020.
“It is however encouraging to note that 70% of our respondents in Kenya reported to have invested in programs to combat Bribery & Corruption, so it is a vice and risk we are well aware of. The deliberate investments in anti-bribery programmes may be paying off given the ability of organisations to detect and report this vice. This may have contributed to reported increase in incidences of Bribery & Corruption”, said Muniu Thoithi.
We have also observed encouraging trends in Kenya in the 2020 survey. 8 in 10 of the Kenyan respondents that reported having suffered economic crime conducted forensic investigations, 63% instituted disciplinary proceedings and/or terminated services of the implicated employees and 61% implemented enhanced internal controls.
“This is very encouraging and goes to demonstrate that Kenyan organisations are employing important strategies aimed at combatting the threat of economic crime”, said PwC’s Muniu Thoithi.
Customer fraud is on the rise globally and remains high in Kenya. Customer fraud is especially prominent in the financial services and consumer markets 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 to their organisations as vendors for outsourced services, customers, etc. 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 Peter Ngahu, PwC’s Regional Senior Partner in Eastern Africa.
To counter the 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.
These and other findings are discussed in PwC’s 2020 Global Economic Crime and Fraud Survey:Kenya Report, released in Nairobi on 4 March 2020. PwC Kenya released the report and commented on the global high level findings as well as Kenya specific changes and trends in economic crime.
The full report is available here.