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Corporate India enhances investment in technology for tackling internal fraud, reveals Deloitte Fraud Perception Survey, 2018

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  • Recent regulatory action and successful technology investments by organisations added to rising optimism on tackling fraud
  • Bribery and corruption is slipping down the list of frauds experienced by companies.
  • Around47% of respondents believe that anti-fraud legislations have been successful in curbing incidents of fraud, misconduct, and noncompliance.
Mumbai, December 7, 2018: Deloitte India today released the India Corporate Fraud Perception Survey, edition III, 2018.
Almost 58% of respondents polled in the survey believe that corporate fraud will increase in the future but, appeared optimistic about their organisations’ abilities to manage fraud. Interestingly, this is a sharp decline from the previous editions of the survey (conducted in 2014 and 2016) where around 70% of respondents felt corporate fraud was likely to prevail over the coming years.
Commenting on the survey, Nikhil Bedi, Partner and Leader – Forensic, Financial Advisory Services, Deloitte India, observed, “There is greater sensitivity to the reputational damage that corporate fraud, misconduct and noncompliance can cause, thanks to actions taken by regulatory bodies (in India and overseas) in the recent past – whether by introducing new anti-fraud and related legislation or through stronger enforcement action on existing provisions. Organisations are recognising that fraud is a result of internal systemic loopholes that can be plugged by stronger controls and limited overrides, and are making investments in these areas,”
The top three reasons for fraud were identified as lack of an efficient internal control/compliance system, diminishing ethical values, and senior management override of controls. Among the respondents who indicated having experienced fraud previously, said that the most common fraud and misconduct schemes included vendor/customer/business partner favoritism, inventory pilferage and diversion / theft of funds. However, only 17% of respondents indicated that their organisation had experienced bribery and corruption in the recent past. This may be a result of better internal controls instituted to prevent bribery, as well as measures taken by the government in recent times to limit avenues for bribery. About 49% of respondents indicated losing more than Rs 10 Lakh in fraud losses in the recent past.
Surprisingly, junior and middle management employees were identified as being most likely to commit fraud. About 64% of respondents, however, believe that suspicious behaviours in employees could be identified early on and dealt with appropriately to prevent fraud.
Additionally, around 87% of respondents indicated that fostering an ethical mindset among employees could prevent fraud in the long term. (I am not sure if this sentence is making any value addition to the release)
Technology as a fraud control tool
Technology is increasing being employed as a fraud control tool in organizations. The survey identified. The most commonly used techniques and tools to prevent fraud were identified as reliance on control based reports generated by the ERP system (54%), a risk based approach for analytics (44%), and traditional statistical analysis and data mining tools (41%). A fourth of the respondents also indicated that they had implemented or were implementing next generation tools and techniques such as voice search and analysis, link analysis, social network analysis, sentiment analysis, data visualisation, interactive dashboards, machine learning, robotic process automation and artificial intelligence.
“Undoubtedly technology is helping organisations better manage the risk of fraud. Bolstered by the successful outcomes seen over the last two years, organisations are now investing in the next level of anti-fraud technologies that rely on machine learning, artificial intelligence and robotic process automation platforms,” added Mr. Bedi.
The survey further revealed that fraud was detected primarily through whistleblower hotlines. About 59% of respondents indicated that fraud related observations were addressed immediately, by way of commencing investigations – internally or assisted by third parties. About 49% of respondents pointed out that once the fraud was ascertained, the fraudster was allowed to resign in lieu of filing a legal case in the majority of cases while a third of respondents indicated that they took legal action against the fraudster.
Download the report here.
About the survey
This survey report was developed on the responses received to a Deloitte India questionnaire that was circulated to leading CXOs and working professionals across all major sectors and organisations working in the area of fraud risk management during August- October 2018. The survey saw 439 responses, of which two–thirds of respondents identified themselves as decision makers in the finance, operation, information technology, compliance, legal, internal audit and fraud risk management areas. Close to 70% of survey respondents identified themselves as belonging to organisations with over Rs 250 crore turnover.
This edition of the survey also provides insights on the future of fraud, including who the future fraudster would be, what is new in cybercrime, impact of IoT devices on fraud investigations, using bots to conduct due diligence, implications of regulatory action on fraud, and building an anti-fraud sentiment in entrepreneurship.
Notes to the editor for reference purposes only:
Deloitte India herein refers to Deloitte Touche Tohmatsu India LLP.
This press release has been issued by Deloitte Touche Tohmatsu India LLP.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.
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