Financial Crime World

Fraud Epidemic Hits Global Markets: Customer Fraud Tops the List

A Growing Concern for Businesses Worldwide

A staggering 35% of global businesses have fallen victim to fraud in the last 24 months, with customer fraud emerging as the most common and costly type. According to PwC’s latest Global Economic Crime and Fraud Survey, customer fraud accounted for a whopping 26% of all reported crimes.

Customer Fraud: The Most Common Type

  • Financial services and consumer markets sectors are particularly vulnerable to customer fraud
  • This could have significant implications as more industries shift towards direct-to-consumer strategies
  • Dedicated resources, robust processes, and technology can be effective in preventing such frauds

Luxembourg’s Unique Market Dynamics

  • Luxembourg’s market dynamics make customer fraud less relevant compared to large countries like the US or UK
  • However, with the evolution of digital channels, this could become a growing concern for the country in the future

Third Parties and Senior Management also Fall Short

Third-Party Risks

  • 19% of reported frauds were associated with third-party vendors and suppliers
  • Half of respondents lack a mature third-party risk program, while 21% have no due diligence or monitoring process at all

Luxembourg’s Financial Services Sector: A Higher Level of Sophistication

  • 51% of companies in the country have a documented, risk-based due diligence and ongoing monitoring process for third parties

Senior Management Fraud: A Major Concern

Senior Management Risks

  • 26% of respondents cited senior management fraud as the source of their most disruptive external fraud
  • These crimes are often insidious due to the ability of top executives to override internal controls or conspire to do so

Accusations and Regulatory Focus

Accusations of Perpetrating a Fraud

  • Nearly 3 in 10 companies that reported experiencing fraud were also accused of committing a fraud, corruption, or other economic crime
  • In Luxembourg, only 5% of respondents reported being accused of such crimes, which is significantly lower than the global average

Regulatory Focus and Fines

Implications for Small Businesses in Luxembourg

  • Regulators are increasingly focusing on fraud and imposing fines and sanctions, which can have a significant impact on smaller organizations in the country

The Human Cost of Fraud

Financial and Non-Financial Consequences

  • Fraud losses are not just financial; they also have a profound impact on employee morale, brand reputation, and future business opportunities
  • The survey found that 13% of respondents globally reported losing more than $50 million due to fraud in the last 24 months

Top Causes of Direct Losses

  • Antitrust, insider trading, tax fraud, money laundering, and bribery and corruption
  • Major frauds perpetrated by insiders were particularly damaging, resulting in losses of $100 million or more in 43% of cases

The Total Cost of Fraud: A Staggering $42 Billion

The Need for Businesses to Prioritize Fraud Prevention and Detection Measures

A staggering 35% of global businesses have fallen victim to fraud in the last 24 months, with customer fraud emerging as the most common and costly type.