Only 36% of those surveyed believe that their organizations are adequately prepared to prevent, detect and respond to fraud. Likewise, the companies that detected cases of fraud during the last year, on average, suffered 46 cases during the last year. Cybersecurity Fraud cases came to lead the typical types of Corporate Fraud, representing 58% of cases, and fraud schemes “Corruption” and “Purchasing Fraud”, liderated mainly by Middle Management, doubled the cases of embezzlement of assets.
Additionally, 25% of the fraud cases involved losses greater than 500 thousand dollars, and 3% implied losses greater than 100 million dollars. Corporate fraud generated $163,000 in losses on average for each incident detected in the last year for each company. 74% of the schemes identified had a maximum duration of up to 2 years, and 77% of them were committed by more than one person. Regarding the geographical distribution: Argentina, Mexico and Brazil accounted for 74% of the fraud cases detected in the region.
When talking about the most significant frauds, we observe a growing tendency to prosecute them, since 37% of the cases were brought to trial; and “changes in business processes” and “layoffs” were the most widespread measures among organizations, at 93% and 51%, respectively.
Likewise, it is observed that there is no trend that allows us to link the seniority or hierarchy of an employee with a greater or lesser probability of committing fraud, representing a change in trend that continues to strengthen over the last decade.
Regarding the reporting channels, only 11% of the companies implemented said channels, following the best practices, using the services of specialized companies. Along these same lines, few companies perceive that they have managed to manage the cultural change necessary for their collaborators to report, without exception, significant facts contrary to the ethical development of business. Only 26% of those surveyed stated that employees in their organization would always report serious events through the established reporting channels.
Compared to the survey carried out by BDO in 2018/2019, we observed an increase of 8% in the number of organizations that mention being covered by some anti-corruption regulation. On the other hand, of the 54% of the organizations that say they are not covered by any anti-corruption standard, 67% correspond to companies whose headquarters are established in countries that have already enacted an anti-corruption standard.
Regarding the perspectives on the impact of corporate fraud, 52% of companies believe that corporate fraud was the same or higher compared to the previous year. At the same time, 69% of Latin American companies believe that corporate fraud will be the same or higher compared to the last 12 months, but given this scenario, it is striking how only 33% state that they will increase their investments to adapt to the current situation. forecasted.
Key recommendations
From what has been pointed out, it is clear that organizations must act quickly. The international trend shows us that business development based on ethical principles requires comprehensive management, with the implementation of Compliance programs that include the following aspects:
- Clear support from senior management (Tone from the Top)
- Risk identification
- Continuous monitoring and evaluation, with a focus on technology-based controls
- Identification of Cybersecurity gaps
- Training for employees and third parties that provide strategic services
- Third Party Screening
- internal investigations
- Implementation of reporting channels
- Strengthening of the Compliance function
Regional Partner of Forensics for Latam of BDO.
Source: Ambito
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