Industry Insights: The EY Global Fraud Survey

July 19, 2018

This year’s EY’s Global Fraud Survey once again offers an abundance of insights from global business leaders on how the volume of data along with disruptive technologies like digital payments, Internet of Things (IoT) and artificial intelligence (AI) are not only transforming business models but also the risks of fraud, bribery and corruption. Here are some highlights from the report that I found of interest.

Fraud and corruption levels
While the survey found that some countries showed improvements in regards to corruption and fraud, the global numbers have not seen a decline over the past two years. While typically prevalent in emerging markets, widespread corruption in developed markets was reported by a significant minority of survey respondents. To add to the challenges of fighting fraud and corruption, 38% of respondents indicated that bribery and/or corrupt practices are common in business in their country.
 
Integrity in business
Despite 97% of respondents indicating they recognize how important it is for their organization to demonstrate that it operates with integrity, and the majority indicating that their company’s management team has implemented anti-fraud and anti-corruption measures such as policies, whistleblowing hotlines and statements of ethics, there does not appear to be a corresponding reduction in unethical conduct or business failures. EY attributes some of this discrepancy to many employees not having a clear understanding of exactly who within their organization is responsible for integrity.
 

So who is responsible to ensure that employees are behaving with integrity? According to the report, 41% of respondents believe it is management’s job. Another 22% think that individuals have a responsibility to behave with integrity. The remainder of the respondents believe that the Board, HR, Legal and Compliance have a role in ensuring that employees act with integrity.

 
Emerging risks
With digital technology evolving rapidly, business models have been forced to transform in order to keep pace; this has, however, introduced new risks to organizations. These new models are often more open and connected, increasing the business’ exposure to both ransomware and cyber threats, as indicated by the 37% of respondents who indicated that cyber attacks are one of the greatest risks to their company.
 

Changing regulatory environment (43%), macroeconomic environment (42%) and fraud and corruption (36%) were also mentioned as top risks to businesses.

 
Perceptions of corruption
In this year’s survey, EY compared respondents’ perceptions on widespread corruption from 2014 to 2018. While more respondents from Australia and New Zealand, Brazil, Saudi Arabia and the UK believed that corruption to be widespread (which may be attributable to a significant increase in regulatory enforcement in 2017), China, the Czech Republic, Romania and the US showed decreases in the percentage of respondents believing that corruption is widespread.  For the second group of countries, it remains unclear as to whether enforcement activity before 2014 led to changes to compliance programs, or if views of corruption has simply decreased in tandem with enforcement actions.
 
Redefining the compliance function
To keep up with changing business models and technology, the report notes that the compliance function will also need to transform accordingly to ensure it is better able to prevent, detect and respond to fraud and corruption. EY states that technological advances, such as enhanced data analytics, will ultimately lead to compliance becoming a key driver of innovation in the use of forensic data analytics. Examples include:
 
  • Traditional monitoring of the compliance function will be challenged due to the increasing use of data analytics as a management tool.
  • With the help of big data’s advancing predictive capabilities, analytics will be used to make decisions in real-time. This will aid in the identification and prevention of fraud, and will give management more effective oversight.
  • Artificial Intelligence will replace more traditional training, such as in-class and web-based training, with “individualized risk-based communication in real-time” for leading companies.

By leveraging these technological advances such as forensic data analytics, implementing compliance policies and procedures, and providing employee training, organizations can deliver more effective compliance.

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About Anu Sood:

Anu Sood is the Director of Product and Corporate Marketing at CaseWare Analytics and is responsible for the company’s global marketing strategy. Prior to CaseWare Analytics, Anu worked in various roles in the high-tech industry and her accomplishments range from writing software for telephone switches to launching a new global satellite communication service. Anu has extensive experience in strategic marketing, corporate communications, demand generation, content marketing, product management, product marketing and technology development. 

Connect:    Anu Sood 

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