More Than Half of U.S. Companies Were Victims of Economic Crime in the Last Two Years

Approximately 25 Percent Believe They are At Substantial Risk for Economic Crime in the Next Five Years

New York, New York, UNITED STATES


NEW YORK, Nov. 29, 2005 (PRIMEZONE) -- Rising economic crime poses a growing threat to companies, with nearly half of all organisations worldwide, including U.S. companies, citing themselves as victims of economic crime in the past two years, according to PricewaterhouseCoopers' Global Economic Crime Survey 2005.

Globally, the number of companies reporting fraud increased from 37 percent to 45 percent since 2003, a 22 percent increase. The cost to companies was an average US $1.7 million in losses from "tangible frauds," those which result in an immediate and direct financial loss. These include asset misappropriation, false pretences and counterfeiting.

The biennial survey involved 3,634 companies from 34 countries including the U.S. and was conducted in association with Germany's Martin-Luther University, Halle-Wittenberg. It revealed that the total losses at 1,227 of these companies that could quantify their losses exceeded US $2 billion over the last two years; the number of companies reporting financial losses increased by 50 percent since 2003.

Companies around the world, on average, reported suffering eight fraud incidents since 2003. The larger the company, the more likely it experienced and detected acts of fraud. Larger companies reported an average of 12 incidents. Regardless of size, no company or industry, regulated or unregulated, was immune from fraud.

"The rise in economic crime is cause for concern. Companies may have a false sense of security when it comes to fraud. More companies are reporting financial crimes, they're reporting a higher number of incidents, and most cases are detected by accidental means," said Steven Skalak, Global Investigations Leader, PricewaterhouseCoopers. "Economic crime is not something to be taken lightly; companies need to tighten their controls to avoid not only direct financial losses, but also damage to their brand, to staff morale and to relationships with customers, suppliers and other business partners."

An Increase in Economic Crime

According to PricewaterhouseCoopers, the 22 percent increase in companies around the world reporting economic crime since 2003 may be attributed to:



    -- More incidents of economic crime being committed.
    -- Increased economic crime reporting due to tighter regulations
       requiring increased transparency.
    -- Introduction of risk management controls to detect economic
       crime.
    -- A "confess and remedy" environment among regulators that
       encourages economic crime reporting.

Despite the growing number of companies reporting fraud around the world, nearly 80 percent did not consider it likely that their company will suffer fraud over the next five years.

The survey also showed increases in the various types of fraud that can affect a company, from asset misappropriation to counterfeiting. Globally, there has been a 140 percent increase in the number reporting financial misrepresentation, a 133 percent increase in the number reporting money laundering, and a 71 percent increase in the number reporting corruption and bribery.

In the U.S. and North America the survey found that 79 percent of the corporate "fraudsters" are male, between the ages of 31 and 40, with college educations or higher degrees. Sixty percent were employed by the defrauded company, 47 percent in a managerial capacity.

Economic Crime Detection

Internal controls fail to detect economic crime 60 percent of the time in the United States, however internal audit is cited as the single most effective control mechanism, detecting just over 30 percent of the reported cases in North America and 26 percent of the reported cases globally.

Notes to Editors:



   1. Definition of fraud terms used in the PricewaterhouseCoopers
      Global Economic Crime Survey 2005
         -- Economic Crime or Fraud: Generic term used in this survey
            to denote wrongful or criminal activities to or in an
            organisation, intended to result in the gain of money or
            benefits for the perpetrator(s).
         -- Asset Misappropriation (inc. embezzlement): The theft of
            company assets (including monetary assets/cash or
            supplies and equipment) by company directors, others in
            fiduciary positions or an employee for their own benefit.
         -- False Pretences (inc. confidence game): The intentional
            action of a perpetrator to deceive those in fiduciary
            positions and make a personal or financial gain.
         -- Financial Misrepresentation: Company accounts are altered
            or presented in such a way that they do not reflect the
            true value or financial activities of the company.
         -- Corruption & Bribery (inc. racketeering and extortion):
            The unlawful use of an official position to gain an
            advantage in contravention of duty.  This can involve the
            promise of an economic benefit or other favour, the use of
            intimidation or blackmail.  It can also refer to the
            acceptance of such inducements.
         -- Insider Trading (only asked to listed companies): Trading
            of securities by a person inside a company based on
            non-public information.
         -- Money Laundering: Actions intended to legitimise the
            proceeds of crime by disguising their true origin.
         -- Counterfeiting (inc. product piracy and industrial
            espionage): This includes the illegal copying and/or
            distribution of fake goods in breach of patent or
            copyright, and the creation of false currency notes and
            coins with the intention of passing them off as genuine.
            It also includes the illegal acquisition of trade secrets
            or company information.

   2. PricewaterhouseCoopers' Global Economic Crime Survey 2005 was
      conducted on behalf of PricewaterhouseCoopers and the leading
      criminological scholars at Martin-Luther University,
      Halle-Wittenberg by TNS-Emnid in Germany.

      The survey was conducted in 34 countries between May and
      September 2005.  Over 3,634 computer-assisted telephone
      interviews were conducted with CEOs, CFOs and other executives
      who claimed responsibility for crime prevention and detection
      within their respective companies. More than half of the
      respondents (52 percent) are members of the executive board or
      company management; 43 percent stated that their main
      responsibility was in the field of finance.

      The companies were randomly selected with preference given to
      the 1,000 largest companies of a country and the target number
      of respondents for each country was determined according to its
      GDP.

      A full copy of the report can be found at:
      www.pwc.com/crimesurvey

      Audio and video clips pertaining to the
      PricewaterhouseCoopers Global Economic Crime Survey can be
      viewed and downloaded for use at www.thenewsmarket.com/pwc

   3. PricewaterhouseCoopers Dispute Analysis & Investigations
      practice operates across over 50 countries and can deploy
      experienced and knowledgeable teams to manage and mitigate the
      threat of corporate crimes and achieve the best possible
      outcomes.  Using in-depth forensic accounting and corporate
      investigation skills allows clients to continue their business,
      recover lost funds, and halt further economic losses.  The
      expertise to assist organisations investigate and manage the
      many risks associated with fraud, abuse and dishonesty comes
      from the experience of the international staff and their
      backgrounds in forensic accountancy, forensic IT and private
      sector investigations as well as regulatory work and law
      enforcement.

   4. PricewaterhouseCoopers (www.pwc.com) provides industry-focused
      assurance, tax and advisory services for public and private
      clients.  More than 130,000 people in 148 countries connect
      their thinking, experience and solutions to build public trust
      and enhance value for clients and their stakeholders.
      "PricewaterhouseCoopers" refers to the network of member firms
      of PricewaterhouseCoopers International Limited, each of which
      is a separate and independent legal entity.  (c) 2005
      PricewaterhouseCoopers. All rights reserved.


        

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