India, China have second-highest prevalence of fraud: survey
19 Oct 2011
India has moved up to second spot , in a disreputable list of rankings of among nations with high prevalence of fraud, says the Global Fraud Report by risk consultancy firm, Kroll.
Last year, India ranked fifth in the list, but this year it has moved up to the second spot, which it shares with China. The list was drawn up by Kroll, together with the Economist Intelligence Unit, based on a survey with 1,200 senior executives across five regions in the world from a wide range of industries and functions.
''The high staff turnover was one of the major reasons for fraud exposure, as reflected in the survey,'' says Richard Dailly, managing director, Kroll India. ''Though it cannot be said that firms are not doing anything to prevent fraud, it can be inferred that they are not doing enough.''
The report noted there was an absence of strong anti-corruption laws and enforcement in the BRIC nations - Brazil, Russia, India and China - compared to the UK and the US. ''The wider internationalisation of Indian firms is bringing their compliance practices followed outside India back into the activities within the nation,'' added Dailly. ''The private sector in India is leading the way forward for others. It is a slow process but it is definitely moving in the right direction.''
Seventy-eight per cent of the 124 private sector executives quizzed in India admitted their organisations were 'highly' or 'moderately' vulnerable to corruption or bribery. The most common frauds experienced by Indian executives over the past one year included corruption and bribery (cited by 31 per cent of the respondents) and information theft, loss or attack (27 per cent).
Other frauds reported by the executives included internal financial fraud or theft (by 23 per cent of respondents), theft of physical assets or stock (also 23 per cent), vendor, supplier or procurement (22 per cent), financial mismanagement (22 per cent) and management conflict of interest (19 per cent).
The survey revealed that less than half the respondents in India said they invested in employee background screening, partner or third-party due diligence and risk management systems, despite the fact that nearly 60 per cent of the victims of fraud suspected it was an insider job.
''What is actually needed is proper accountability and effective sanctions in place among the corporates,'' said Dailly. ''A combination of education and legislation is needed in addition.''
