Czech Republic sees marked increase in economic crime

International consultants PricewaterhouseCoopers has released the results of its biennial global economic survey, based on thousands of interviews with senior executives, casting light on trends in economic crime. According to the report, global economic crime has grown substantially since 2003's result - an 8 percentage point increase. Most notable, worldwide, has been the increase of fraud. How has the Czech Republic fared?

Jan Velinger joins us in the studio.

JV:"It's true, that the numbers aren't positive and are nothing to cheer about. In the Czech Republic PricewaterhouseCoopers randomly surveyed representatives from 75 companies and a full 63 percent said their firms had been hit by economic crime since 2003. That represents an increase of 133 percent. But, the news doesn't have to be all bad: for one, firms over the last two years have grown more efficient at exposing economic crimes and they are more willing to talk about fraud, to admit it exists. Those are significant shifts, I found out, when I spoke to Roger Stanley, from PwC's Forensic Services.

"I think that there is a combination of factors which has led to this reported increase. Of course, on is an actual rise in incidence in economic crime that has taken place. And the reasons for that are a combination of factors: better transparency from companies, a willingness to actually talk about fraud, Form what I've seen fraud is no longer a taboo subject. And of course another key underlying factor is the ability of companies to implement fraud controls, which then help them detect fraud from going forward."

RP: In actual fact, in previous years the number of economic crimes may have been higher, but they simply either weren't being reported.

"Absolutely. If you look at our survey from two years ago you'll see that not one company reported an incidence of corruption; now we see 42 percent of companies reporting that they have suffered from corruption. Companies now recognise that it's no longer an accepted business practice."

Nevertheless, if fraud and embezzlement and corruption are on the rise, who are the people committing the crimes? Management? Clients? Employees?

JV: "Among the highest are both suppliers and customers - but by far the highest number of those involved, not so surprisingly, are employees - a full 36 percent of economic crimes are conducted in-house. The nature of the crimes is diverse, and there is of course crime at all levels, although the numbers in top management have somewhat dropped. Typically, crimes are committed by men, between the ages of 31 and 40, and most (77 percent) have only high school education - or less. In terms of damages, the firms surveyed in the Czech Republic 13 percent said they suffered damages over 250 000 USD, lower than the global average. On the other hand, here companies said those losses had a significant impact on production or the running of the firm."

Despite all this many firms remain cautiously optimistic: is it true that many believe they will not be hit by crimes?

JV:"According to the survey, yes. There are a lot of company representatives who say they think economic crime is not that great a threat, or perhaps feel they will be more prepared, in the future, to deal with them. PwC's Roger Stanley again:

"For somebody to perpetrate fraud what happens is that you bring together the motive, the rationalisation to themselves, and of course the opportunity. And when you get those three factors you will get a great environment where fraud can exist. What companies need to do is implement programmes of control and education to create an environment in which fraud will not flourish and they are doing so. I think they are optimistic: of concern is the fact that the number of frauds detected by chance this year is significantly high. It may be false optimism by companies but it may also be companies intending to go forward with new controls."

JV:"As Roger Stanley of PricewaterhouseCoopers mentioned that is an alarming number: 47 percent caught by accident, which is far higher than the 34 percent worldwide average, so clearly, more needs to be done to make it apparent to potential perpetrators if they commit economic crimes, it will not be by chance that they are caught