Financial Services Industry Hit Hardest by Fraud According to Global Report

Mon Oct 19, 2009 8:00am EDT

* Reuters is not responsible for the content in this press release.

Out of 10 industries surveyed, half experienced a spike in fraud activity and
the remaining saw a decline; the global fraud rate remained steady
BOSTON--(Business Wire)--
The global financial services industry saw a dramatic spike in fraud activity
with companies losing an average of $15.2 million over the past three years,
according to the latest edition of the Kroll Annual Global Fraud Report,
released today at the Association of Corporate Counsel`s 2009 Annual Meeting in
Boston. Despite sector-specific spikes and declines in fraud activity, the
worldwide fraud rate remained steady in 2009. Companies lost an average $8.8
million to fraud over the past three years, an increase of seven percent over
last year`s figure which stood at $8.2 million. The findings are the result of a
survey Kroll commissioned from the Economist Intelligence Unit of more than 700
senior executives worldwide. 

Fraud levels varied markedly by sector with five industries experiencing a rise
in fraud losses (financial services; professional services; healthcare,
pharmaceuticals & biotechnology; retail, wholesale & distribution; and travel,
leisure & transportation) and five sectors reporting declines (manufacturing;
technology; media & telecoms; natural resources; and consumer goods &
construction). 

Blake Coppotelli, senior managing director in Kroll`s Business Intelligence and
Investigations unit said:

"Traditionally every downturn brings about a rise in fraud, but what we are
seeing in 2009 is something far more complex.Companies are seeing greater
vulnerability due to reduction in internal controls, pay cuts and reduced
revenue across the board, but counteracting this increased risk are the
realities of today`s constrained business environment, where factors such as
high staff turnover, entry into new markets and inter-firm collaboration are far
less common than in years past.In short, the current economic crisis has
increased the motive for fraud, but decreased the opportunity.

Of course, this shift in business behavior is only as lasting as the economic
crisis itself, which is why companies must work to bolster their existing
anti-fraud strategies in preparation for the economic changes to come."

Overall, 30 percent of companies reported the current economic climate had
directly increased their exposure to fraud over the past 12 months, with only
five percent reporting a decline. Of all the regions surveyed North America
experienced the highest incidence of fraud as a result of the global financial
crisis (32 percent). 

Other key findings include:

* The Middle East and Africa experienced the worst fraud levels of all the
regions with companies losing an average $11.5 million and seeing the highest
incidence rate in seven out of the 10 frauds surveyed 
* North America was no longer the low fraud leader with seven out of 10 fraud
incidences showing an increase over 2008 figures. Companies experiencing
internal financial fraud and financial mismanagement rose substantially, however
theft of physical assets, corruption and vendor fraud were lower than any other
region 
* Larger companies with annual sales of over $5 billion reported greater average
losses (rising to $25.8 million from $23.3 million in 2008), while the situation
improved for smaller businesses with yearly revenue under $5 billion (dropping
to $4.6 million from $5.5 million last year).

The third Kroll Annual Global Fraud Report includes a full detailed industry
analysis across a range of fraud categories and regions. To obtain a copy please
visit www.kroll.com/fraud. 

Methodology

Kroll commissioned The Economist Intelligence Unit to conduct a worldwide survey
on fraud and its effect on business during 2009. A total of 729 senior
executives took part in this survey. A little more than a third of the
respondents were based in North and South America, 25 percent in Asia-Pacific,
just over a quarter in Europe and 11 percent in the Middle East and Africa. 

Ten industries were covered, with no fewer than 50 respondents drawn from each
industry. The highest number of respondents came from the financial services
industry (12 percent). A total of 46 percent of the companies polled had global
annual revenues in excess of $1 billion. 

About Kroll

Kroll, the world's leading risk consulting company, provides a broad range of
investigative, intelligence, financial, security and technology services to help
clients reduce risks, solve problems and capitalize on opportunities.
Headquartered in New York with offices in more than 60 cities in over 29
countries, Kroll has a multidisciplinary team of more than 3,000 employees and
serves a global clientele of law firms, financial institutions, corporations,
non-profit institutions, government agencies, and individuals. Kroll is a
subsidiary of Marsh & McLennan Companies, Inc. (NYSE: MMC), the global
professional services firm. 

About The Economist Intelligence Unit

The Economist Intelligence Unit is the business information arm of The Economist
Group, publisher of The Economist. Through our global network of about 700
analysts, we continuously assess and forecast political, economic and business
conditions in 200 countries. As the world's leading provider of country
intelligence, we help executives make better business decisions by providing
timely, reliable and impartial analysis on worldwide market trends and business
strategies.

Fleishman-Hillard
Emilie Moghadam, 202-857-2212
emilie.moghadam@fleishman.com
or
Claire Sheahan, 202-828-9767
claire.sheahan@fleishman.com



Copyright Business Wire 2009