India ranks third on global fraud prevalence list, says report

27 Jun 2016 | By Ramya
Global fraud report

The ninth edition of the Global Fraud Report for 2015-16 showed that India stood at the third place concerning fraud prevalence among all regions and countries across six continents, surveyed by Kroll Inc.

According to the report, 92% of the surveyed companies reported a rise in exposure to fraud.

About 80% of the firms in India had been victims of fraud during 2015-16.

In context: Global fraud report

2013-14India's Global Fraud Report for 2013-14

The Global Fraud Report for 2013-14 had shown that about 69% of the surveyed firms in India were victims of fraud.

During 2013-14, the highest source of fraud-related income loss was caused by the theft of stock or physical assets for the companies.

About 33% loss was caused by theft, attack or loss of stock/physical assets, while corruption and bribery caused 24% loss.

2015-16Global Fraud Report for 2015-16

The Global Fraud Report 2015-16 was commissioned by Kroll, a risk mitigation consultancy, with the help of Economist Intelligence Unit.

Over 768 senior executives from a broad range of functions and industries were polled globally.

Industries including financial services, professional services, retail, wholesale, distribution, technology, media, telecommunications, healthcare, pharmaceuticals, biotechnology, transportation, leisure, tourism, consumer goods, construction, engineering, infrastructure, natural resources, and manufacturing were surveyed.

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Region-wise percentage of participants

About 50% of the respondents were seniors; 51% of the polled companies had over $500 million annual revenue. About 29% of the respondents were from Europe, 25% from North America, 24% from Asia-Pacific, 12% from Middle East/Africa, and 10% from Latin America.

27 Jun 2016India ranks third on global fraud prevalence list, says report

Sub-Saharan Africa and Colombia top the list

Top 3 CountriesSub-Saharan Africa and Colombia top the list

The Report found that Sub-Saharan Africa (84%) and Colombia (83%) were the only regions/countries that surpassed India with regard to fraud prevalence across the six continents.

The report authors also noted that while fraud prevalence is on the rise globally, in the case of India, due to lack of preventive measures and a poor legal system, about 80% of Indian firms experienced fraud.

Biggest SourceBiggest fraud source in India

An overview of the India-centric data in the survey report shows that the highest incidence of fraud witnessed by the Indian firms is mostly because of the bribery and corruption in the country.

About 25% of the firms stated that their losses were primarily caused by corruption and bribery related frauds.

Although, globally, only 11% companies reported that graft-linked frauds caused revenue loss.

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India's ReportFraud-related sources in India

In India, the highest fraud-related source reported was grant-linked fraud, which caused loss to over 25% of the Indian firms.

Procurement/vendor/supplier fraud is the second-highest source that affected 23% of the companies.

Regulatory and compliance breach accounted for about 20% of the losses caused to Indian firms.

Theft of physical assets or stock caused about 18% of the losses to companies in India.

Region-wise percentage of companies that experienced fraud

According to the Global Fraud Report for 2015-16, the percentage of companies that experienced fraud in some of the prominent regions or countries are: Mexico- 80%, Brazil- 77%, United States- 75%, Europe- 74%, Russia- 73%, China- 73%, Canada- 65%, and Gulf nations- 63%.

Hurdles in IndiaProblems faced by companies in India

The survey reported that biggest sources of frauds in India have changed over few years.

In the previous report, IT complexity was the biggest fraud contributor, while in the current report, cost restraints over pay and high employee turnover are the biggest contributors.

The survey observed that Indian legal system isn't quick enough to make it worth for the firms to approach courts.

Kroll India MD & Head Reshmi Khurana's statement

First, the bar is set high for what constitutes evidence of fraud in a court of law in India; second, once in court, it can take years to settle disputes, by which time the value of the investment may have significantly eroded.