The current global economic and geopolitical situation has created a multitude of challenges for businesses and individuals worldwide. The uncertainties surrounding financial stability and employment have heightened risks, increasing the potential for fraudulent activities that can further harm businesses.
Fortunately, recent research indicates that the fraud rate among businesses has remained stable this year. According to a report from PwC, there has been no significant increase in fraud, corruption, and economic crimes since 2018. In 2022, 46 percent of surveyed companies reported experiencing such crimes, compared to 47 percent in 2020 and 49 percent in 2018.
However, the impact of these crimes on both large corporations and small businesses alike remains substantial. Additionally, the nature of these crimes is a cause for concern as technological advancements, such as Artificial Intelligence, provide new avenues for fraud and economic crime. In this article, we present seven important statistics that businesses need to know about fraud in the workplace.
Consumer losses to fraud have significantly increased in 2022.
Data from the US Federal Trade Commission reveals that consumers lost over $5.8 billion to fraud in 2022, a significant rise of around 70 percent compared to 2020. More than 2.8 million consumers reported crimes to the FTC last year, with imposter scams being the most common issue, followed by online shopping scams.
52% of large companies have experienced fraud in the past 24 months.
Among companies with global annual revenues exceeding $10 billion, 52 percent have encountered fraud in the past two years. Almost one in five of these companies reported that their most disruptive incident cost them over $50 million. The percentage of smaller companies with revenues below $100 million affected by fraud was lower, at 38 percent, but approximately one in four of them faced a total impact of more than $1 million.
External threats outweigh internal threats.
The PwC survey reveals a concerning trend where external entities beyond easy control or influence are becoming more effective in perpetrating fraud and economic crimes. Nearly 70 percent of companies experiencing fraud reported that the most disruptive incidents originated externally or resulted from collusion between external and internal sources. Traditional fraud prevention tools such as codes of conduct, training, and investigations are often ineffective against these external fraudsters.
Among companies with revenue over $10 billion, customer fraud becomes the primary issue. For companies with revenues exceeding $10 billion, customer fraud emerges as the most pressing concern, with 35 percent of them experiencing such incidents. Meanwhile, 32 percent reported cybercrime as a significant threat, and 31 percent encountered asset misappropriation.
Cybercrime is the primary concern for most companies, except the largest ones.
Across organizations of various sizes, cybercrime poses the most significant threat, followed by customer fraud and asset misappropriation. Among companies with less than $100 million in revenue, 32 percent identified cybercrime as their biggest concern, while 27 percent cited customer fraud, and 23 percent reported asset misappropriation. In companies with revenues ranging from $100 million to $1 billion, 41 percent experienced cybercrime, whereas 32 percent and 23 percent encountered customer fraud and asset misappropriation, respectively.
Fraud rates saw a significant increase during the COVID-19 pandemic.
The economic downturn and social instability observed during the pandemic created fertile ground for fraud and financial crimes. The PwC report found that 70 percent of those encountering fraud experienced new incidents during this period. While remote work reduced the risks of asset misappropriation, it led to increased digital security issues. Blackmailing or physically attacking employees emerged as new concerns as companies allowed access to corporate data.
Threats from hackers and organized crime have seen a significant rise in the past two years.
Approximately one-third of external cases were attributed to hackers, and 28 percent involved organized crime rings. Notably, European organizations are more vulnerable to external perpetrator incidents compared to other regions. As a result, companies need to shift their focus to consider external threats in addition to internal risks.
Looking ahead, while concerns like cybercrime and consumer fraud persist, businesses should also pay attention to emerging threats that currently receive less attention. For instance, PwC suggests that the prevalence of anti-embargo fraud may increase in the next two years as global sanctions reach historically high levels. Other emerging threats include environmental, social, and governance (ESG) reporting fraud, as well as supply chain fraud. Currently, 8 percent of businesses report ESG fraud, and one in eight companies have experienced supply chain fraud. These numbers are likely to rise in the coming years due to the growing importance of sustainability as a global concept and ongoing challenges within international supply chains.
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