Economic crime still a problem for Canadian companies

    TORONTO, Oct. 16 /CNW/ - Despite efforts to strengthen and implement
controls, over half of Canadian companies report being a victim of economic
crime. According to the biennial PricewaterhouseCoopers (PwC) Global Economic
Crime Survey the average loss suffered by Canadian companies in 2007 increased
significantly to US$3.7 million from US$600,000 in 2005. Globally companies
suffered an average loss of US$2.4 million-an increase of US$700,000 from
US 1.7 million reported in 2005.
    Over the past two years, 62% of Canadian companies surveyed have
strengthened existing controls or implemented new measures. Almost all (93%)
of Canadian respondents indicated that measures currently present in their
company were introduced due to the US Sarbanes-Oxley Act 404 and Canadian
Multilateral Instrument 52-109. Yet of these respondents:

    -   36% did not have a whistleblower hotline;
    -   35% did not have an audit committee;
    -   50% lacked adequate fraud risk management techniques;
    -   67% did not have specific fraud related training; and
    -   20% did not have specific actions planned to deal with
        economic crime.

    "Fraud levels have remained high and have not changed significantly over
the past four years, yet companies continue to be confident in their fraud
controls," says Steven Henderson, PwC Partner and National Leader of the
firm's Investigations & Forensic Services practice. "Forty-seven percent of
Canadian companies and 52% of global companies surveyed think it is very
unlikely that their organization will be a victim of economic crime in the
next two years. This gap between perception and reality is concerning. As the
results demonstrate, many companies still have work to do to ensure their
antifraud regime meets best practices."
    The survey found that asset misappropriation had the highest number of
reported incidents globally over the past two years (30%). Yet respondents
have perceived asset misappropriation as less of a threat since 2003. Global
respondents perceived corruption and bribery to be the most prevalent economic
crime in their business (22%). Although Canadian companies correctly perceived
asset misappropriation as being the most prevalent, the actual percentage of
reported incidents was 43% - much higher than the perceived level of 27%. For
Canadian companies, in the case of accounting fraud, money laundering and IP
infringement, the perceived level of incidences was greater than the actual
number of incidents.
    Henderson adds, "In addition to the direct financial losses reported
businesses must deal with the "management costs," which result from a
significant fraud. This can include such things as reallocating management
time, which adds to the possible costs of litigation in retroactive action,
managing a possible PR campaign and dealing with renewed regulatory oversight
and demands." Global respondents who were victims of fraud estimated these
costs to be an average of US$550,000 over the past two years. Canadian
respondents, however, estimated these costs to be an average of
US$1.2 million.
    More than half (59%) of Canadian companies identified financial incentive
(i.e. greed) as the key motivation for perpetrators to have committed fraud.
Sixty-seven percent of the Canadian companies surveyed that reported incidents
of economic crime said employees were the main perpetrators of the most
serious fraud offences. Thirty-seven percent of the acts committed were by
members of middle management or above, showing a decreasing number of frauds
being detected among individuals higher up the corporate ladder. This may be
due to the fact that senior management figures are more likely to commit
complex economic crimes, such as accounting fraud, which are harder to detect.
Conversely, "simple" frauds such as asset misappropriation, which are often
easier to detect, can be perpetrated in an unsophisticated manner by staff
across the entire organization.

    PricewaterhouseCoopers ( provides industry-focused assurance,
tax and advisory services to build public trust and enhance value for its
clients and their stakeholders. More than 140,000 people in 149 countries
across our network share their thinking, experience and solutions to develop
fresh perspectives and practical advice. Now celebrating 100 years of
excellence in Canada, PricewaterhouseCoopers LLP ( and its
related entities have more than 5,200 partners and staff in offices across the
    "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, an Ontario
limited liability partnership, or, as the context requires, the
PricewaterhouseCoopers global network or other member firms of the network,
each of which is a separate and independent legal entity.

For further information:

For further information: Carolyn Forest,,
(416) 814-5730; or visit

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