CORPORATE FRAUD. THE REALITIES OF THE RUSSIAN ECONOMY

Security must be paid for, and its absence must be paid for.

Winston Churchill

Security issues within the enterprise have plagued global companies for decades. And all studies in this area show extremely disappointing results. The main problem in the list of potential threats are employees, of all positions and levels.

There is evidence that Western companies lose about 6% of their turnover due to employee fraud. The term “business intelligence” is firmly entrenched in European practice and accounts for 0.5 to 1% of company turnover. Since the damage inflicted on companies by their own employees can sometimes be compared with any machinations of competitors, reaching up to 90% of total losses.

Russian studies give even more negative statistics. In our country they spend much less (not more than 0.1% of turnover) to protect companies from “left-handed” activities of employees, so the level of fraud among employees is much higher.

In Russia, corporate fraud can be divided into five types:

1. Asset misappropriation. This is the main type of economic crime. It accounts for about 70% of detected cases of theft. Both individual and group schemes are used here. The scale of losses from such schemes reaches enormous proportions.
2. Corruption crimes are the real scourge of Russian business. There was a research, according to the results of which more than 60% of executives confirmed that “kickbacks” received by their employees are the most economically dangerous fraud for an enterprise. Receiving “kickbacks” provokes higher prices from suppliers, accumulation of debts and in the end undermines partnership relations. Unfortunately, in Russia the kickback scheme works almost without fail and more and more “businessmen” build their business solely on bribery.
3. Information leakage. This type of fraud is no less unprofitable. Leaking inside information, “leakage” of client or partner data, copying working schemes can do irreparable damage to the company.
4. Abuse of position. This can include work with the use of “fly-by-night companies” that do not pay for goods on time, if they pay at all, which also causes additional losses for the company.
5. Theft itself, as such, is also quite common in modern business, but according to statistics, they do not cause much damage to the enterprise (no more than 7% of total losses on economic crimes).

More than 2/3 of personnel are involved in the so-called “compensatory theft”, the main motive of which is the conviction of their undervalued by management, which allows them completely free to use all available means to “compensate for undervaluation”.

The majority of economic crimes in Russia were initially detected by the corporate security service and the internal audit service. However, unintentional detection of fraud remains the predominant trend worldwide (40% of detections).

Conclusion

In analyzing the complicated situation with internal fraud, we can say only one thing: combating fraud cannot be a temporary action or a set of answers to specific challenges. It should be preventive, systemic in nature. And of course it’s very important that the system is fine-tuned and the work is performed by highly qualified specialists. It may not always be specialists from the internal security service. Often, it is reasonable to use a contracting company that specializes in this type of activity. Now there are companies on the market with many years of experience and an impeccable reputation in the field of security.

The choice is always yours!