PwC Hungary survey: Corruption high, cybercrime rising

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This month saw release of the latest report by PricewaterhouseCoopers (PwC) on economic crime in Hungary and throughout the world. The main inference: Cybercrime is serious and it’s only getting worse. Would you believe 26% of Hungarian enterprises reported their victimization via fraud – and that the number worldwide is 37%?

In a survey of over 5,000 senior executives around the world, roughly three in eight respondents stated that fraud had been perpetrated against their firm in the past 24 months – enough of a negative response for PwC to proclaim a “sharp increase in cybercrime and procurement fraud activity.”

Of the 5,000 respondents, an undivulged number of respondents from 91 Hungary-based companies participated in the PwC survey. Some trends in Hungary are roughly in line with the international results. Misappropriation of funds remains the no. 1 type of fraud committed both worldwide (reported by 63% of respondents who had experienced fraud) and in Hungary.

Despite the fact that fewer Hungary-based senior executives reported experiencing fraud than the international average, at 38% of fraud described as cases of bribery/corruption the country naturally “topped” both Central Eastern European nations (34%) and worldwide (27%) averages.

PwC sees the aforementioned cybercrime as a trouble spot for Hungarian businesses going forward: Some 17% of Hungarian respondents said they’d experienced an instance of cybercrime in the past 24 months, well up from the miniscule 4% response seen in a similar PwC survey taken in 2011. Oddly enough, however, just 16% reckon they could face such fraud this year.

Commenting on this seeming contradiction, PwC Hungary Forensic Services director George Surguladze said, “It appears that, compared to their regional and global peers, Hungarian organizations underestimate the risk that they may become victims of cybercrime. The rate of reported economic crime might be lower than the regional and global average, but the new forms of fraud are often hard to detect and have a high latency…”

Among other key findings from the Hungary-based respondents to the survey follow.

• Asset misappropriation (63% of companies) was listed as the most common economic crime, followed by bribery and corruption (38%) money laundering (25%), procurement fraud (25%) and cybercrime (17%).

• Over 19% said that their company was asked to pay a bribe in the last 24 months, and 33% of respondents believe that their company lost an opportunity to a competitor that paid a bribe.

• External parties (vendors and customers) are the typical perpetrators of economic crime (58%). Fraud committed by vendors (21%) is twice as common as in the region (11%) or globally (10%).

• The share of internal perpetrators is 42%, which is slightly lower than in the CEE region (46%).

• In the case of internal perpetrators, the organisations usually notify the law enforcement authorities (70%) or take civil action (60%) – these figures exceed both CEE and global results. However, internal fraudsters are fired in only half of the cases (50%), well below regional (78%) and global (79%) levels.

• Similarly, in the case of external perpetrators, organizations notify law enforcement (50%) or take civil action (57%), but business relationships are discontinued only in about one-third of all cases.

For the full results of the PwC 2014 Economic Crime Survey, click here. Results for Hungarian respondents may be found on the PwC Hungary website.

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