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Fraud, cyber, security risk cases at all-time high

84% of companies surveyed worldwide experienced a fraud incident in 2017

Fraud, cyber, and security risks are at an all-time high, the 2017-18 Kroll Annual Global Fraud and Risk report has revealed.

The research which surveyed 540 senior executives across multiple industries including financial services showed that 84% of companies fell victim to at least one instance of fraud over the past 12 months.

This is a 2% increase from the previous survey and a steady increase from 2012 when the reported occurrence was 61%.

Commenting on the space of private banking, Reshmi Khurana, managing director and head of South Asia, investigations and disputes told Citywire Asia:

‘In our experience the private banking industry relies on a secure and stable environment to attract both investors and talent. The industry requires physical and data security, both of which can be threatened by fraud and cyber risks like data breaches that the Kroll Report discusses.

‘Similarly, any geopolitical risks or other security threats will adversely affect the attractiveness of a market or country as a private banking destination.’

Major fraud, cyber and security risks were identified as prevalent in emerging markets such as Indonesia, Malaysia and Vietnam, where a number of Singapore-based investors are focused.

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Fraud, cyber, and security risks are at an all-time high, the 2017-18 Kroll Annual Global Fraud and Risk report has revealed.

The research which surveyed 540 senior executives across multiple industries including financial services showed that 84% of companies fell victim to at least one instance of fraud over the past 12 months.

This is a 2% increase from the previous survey and a steady increase from 2012 when the reported occurrence was 61%.

Commenting on the space of private banking, Reshmi Khurana, managing director and head of South Asia, investigations and disputes told Citywire Asia:

‘In our experience the private banking industry relies on a secure and stable environment to attract both investors and talent. The industry requires physical and data security, both of which can be threatened by fraud and cyber risks like data breaches that the Kroll Report discusses.

‘Similarly, any geopolitical risks or other security threats will adversely affect the attractiveness of a market or country as a private banking destination.’

Major fraud, cyber and security risks were identified as prevalent in emerging markets such as Indonesia, Malaysia and Vietnam, where a number of Singapore-based investors are focused.

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Confidential information

Cited by 29% of respondents, information theft, loss, or attack was the most prevalent type of fraud experienced.

This edged out theft of physical assets or stock, long the most common type of organizational loss, which was the second most frequently cited incident this year of 27%.

Nearly four in 36% executives surveyed said their companies had been impacted by a virus or worm attack. 29% of executives surveyed said equipment with sensitive data was stolen, while 27% said equipment was lost.

‘These results provide a useful warning to companies and investors in Singapore who often hold sensitive information related to their customers, regional subsidiaries and investee companies,’ said Tadashi Kageyama, Apac managing director at Kroll.

‘Such information assets residing in Singapore are becoming increasingly valuable and exposed to threats,’ he added.

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China and India

The percentage of respondents affected by fraud in China and India were higher than the global average of 84%.

In India, fraud increased from 68% in 2016 to 89% in 2017, as a result of physical asset or stock theft, IP theft, piracy or counterfeiting, and corruption and bribery. 

China, on the other hand, the most common fraud were vendor, supplier or procurement fraud and corruption and bribery. The percentage of fraud was 86%.

The next two most common types of fraud experienced in China were information theft, loss or attack, and management conflict of interest.

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Infrastructure investment

Infrastructure projects attract investors on the back of potential returns. For example, investors are increasingly financing capital-intensive infrastructure projects in South Asia.

Kroll’s survey saw the largest year-over-year increases in fraud incidents, up 13 percentage points to 83%, and cyber incidents up 16 percentage points to 93%.

Security incidents in this sector also increased to 67%, up 4 percentage points.

‘Over the last three years, private sector infrastructure investment in India has slowed down due to a combination of stretched corporate balance sheets and rising non-performing assets for banks,’ Khurana said.

‘Foreign investors looking to invest in this sector must closely evaluate the true financial health and future prospects of a project, not relying solely on representations made by local developers.’

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Culprits inside and outside

Of those reporting a fraud incident, 81% cited one or more insiders as perpetrators.

Junior employees were the most commonly named perpetrators of fraud incidents at 39% and former employees were cited most frequently for security incidents at 37%.

‘Investing is an art and investors must manage and ride the associated risks,’ Khurana said, adding that investors can minimize fraud, cyber and security risks.

One way is by conducting a deep qualitative assessment of the operating environment and understanding the full dynamics of the business.

Not getting swayed by the competitive pressures and not compromising on the integrity of the due diligence are other useful measures.

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