Financial Crime World

Common Types of Financial Fraud in South Africa on the Rise Despite Decline in Reported Cases

A recent report by PwC highlights a significant decline in reported economic crime cases in South Africa, with only 60% of organisations experiencing such incidents in 2020 compared to 77% in 2018. However, the value of economic crime continues to rise, with serious crimes valued at over $100 million increasing to 4%.

The State of Economic Crime in South Africa

The report, which examined responses from over 5,000 companies across 99 countries, found that bribery and corruption are still considered the most serious economic crimes affecting businesses in South Africa. This is coupled with an increase in senior management involvement in perpetrating such acts, with 34% of respondents citing internal perpetrators as a major source of fraud.

Top Types of Economic Crime in South Africa

  • Customer Fraud: 47% of South African companies have experienced customer-related economic crime, making it the most prominent type of fraud.
  • Bribery and Corruption: 42% of respondents cited bribery and corruption as a significant issue, highlighting concerns about governance and oversight.
  • Accounting/Financial Statement Fraud: 34% of organisations have experienced accounting-related economic crimes, prompting companies to review their internal controls.

External Perpetrators

  • Organised crime: 27% of South African respondents cited organised crime as the highest rated source of external perpetrators.
  • Customers: 25% of respondents reported that customers were the second most common source of external fraud.
  • Hackers: One in five economic crimes perpetrated by external parties were committed by hackers.

The Cost of Economic Crime

  • Approximately 7% of South African respondents who experienced a fraud in the last 24 months reported losing more than $50 million across all incidents.
  • 4% of respondents reported direct losses in excess of $100 million for all incidents of fraud, corruption or economic crime experienced in the last two years.

Taking Action Against Economic Crime

  • 60% of South African respondents that experienced and addressed a disruptive fraud incident believe that they ended up in a better place after the investigation.
  • Only around half of organisations are dedicating resources to risk assessment, governance, and third-party management.
  • Technology is being increasingly employed by companies globally to combat economic crime, with 30% of South African participants using artificial intelligence.