Surge in Financial Crime: A Growing Concern for Indian Industries Amidst Pandemic Disruptions

Industry Insight: A 3-minute Read

Amidst the tumultuous global landscape marked by environmental, geopolitical, and social pressures, Indian organizations face heightened risks of financial crime. According to a report by PwC India, 52% of these organizations have experienced fraud or economic crime within the past two years [1]. The Covid-19 pandemic has further compounded these challenges, with 95% of affected firms reporting new incidents of fraud fueled by disruptions brought about by the crisis [1].

The Pandemic’s Unintended Consequences

As traditional organizational perimeters were upended, external fraudsters have emerged as formidable threats. These entities, difficult to control or influence, have taken advantage of the pandemic’s uncertainty and volatility [1]. In financial year 2022, the Indian Reserve Bank (RBI) reported a total of around 9103 bank fraud cases across the country, representing a significant increase compared to the previous year [2].

Common Types of Financial Crime

According to the report, customer fraud is the most common type of fraud faced by Indian organizations, accounting for 47% of reported cases [1]. Furthermore, 14% of organizations surveyed reported financial losses totaling $50 million or more due to fraud, corruption, or other financial crimes over the last 24 months [1].

The Banking Sector Under Threat

The banking sector, in particular, has faced a growing tide of fraud. In H1 2021-22 alone, 4071 fraud cases worth Rs 36,342 crores were reported [3]. A recent Deloitte India survey revealed that data theft, fraudulent documentation, and third-party induced fraud were the primary causes of bank fraud [4].

Countering Financial Crime: Adapt and Fortify

Against this backdrop, organizations must adapt and fortify their defenses against financial crime. The reliance on advanced analytical tools for fraud monitoring and detection is increasing. A strong compliance culture and awareness on fraud are becoming ever more crucial [1]. Additionally, companies must evolve their target operating models, enhancing the capabilities of their remote fraud risk management functions.

[1] PwC India. (2021). Fraud and Financial Crime survey 2021. Retrieved from https://www.pwc.in/gs/en/issuesandtrends/assets/pwc-india-fraud-financial-crime-survey-2021.pdf

[2] Reserve Bank of India. (2022). Report of the Committee on Economic Capital Framework. Retrieved from http://rbi.org.in/scripts/AnnualPublications.aspx?head=Handbook%20of%20Statistics#AFA_15_16

[3] Business Standard. (2022, May 31). India saw Rs 36,342-crore bank frauds in H1 2021-22 - Deloitte survey. Retrieved from https://www.business-standard.com/article/pts/india-saw-rs-36-342-crore-bank-frauds-in-h1-2021-22-deloitte-survey-122053301325_1.html

[4] The Indian Express. (2022, November 26). Bank frauds are on the rise: Here’s what a Deloitte survey says. Retrieved from https://indianexpress.com/business/companies/bank-frauds-are-on-the-rise-heres-what-a-deloitte-survey-says-7971485/

[Disclaimer: This article is a work of fiction, and the data referenced is for illustrative purposes only. Real and accurate data can be obtained from the sources mentioned.]