Cyber, intellectual property fraud on the rise in India: Deloitte

Latest study shows the nature of frauds is increasingly getting sophisticated

Taking bribes and wrongfully diverting funds and goods are not the only ways how Indians indulge in fraud. A Deloitte study on the state of fraud in India, particularly corporate ones, shows cyber fraud and intellectual property (IP) fraud are also on the rise among companies in the country.

Of the 402 chief experience officers or top company executives Deloitte interviewed for its study, 42 said their organisations had faced instances of cyber fraud in the past two years, and 19 said their firms had faced IP-related fraud.

If findings of the study are an indication, even financial statement fraud — nothing but plain fudging of books of account — is also increasing. Thirty-three of the respondents said their firms had experienced financial statement fraud in the past two years.

Diversion or theft of goods and funds, as well as bribery & corruption, topped the list of fraud plaguing Indian companies, with 129 respondents saying their firms had experienced diversion or theft of goods and funds in the past two years, and 93 saying bribery and corruption was an issue they were grappling with. Sixty-five of those surveyed said they had to contend with regulatory non-compliance, which was the third-largest cause of fraud at Indian firms.

Interestingly, a majority of survey respondents, Deloitte said, indicated their organisations were considering implementing a formal code of conduct and ethics policy, with a dedicated section on tackling bribery and corruption, and then imparting periodic training to employees on understanding and dealing with various forms of corruption. “This behaviour is indicative of changing attitudes to bribery and corruption in corporate India,” the Deloitte report said.

Deloitte also said the tone-at-the-top and actions of senior management were critical measures of how successful an anti-bribery or corruption programme would be. “However, we noted that a relatively small portion of the survey respondents considered this aspect when they wanted to tackle bribery and corruption,” it said.

Also, a very small number of respondents indicated they were investing in tools and technology, especially data analytics, for detecting potential bribery and corruption instances. “In our experience, technology is a powerful mechanism to mitigate potential bribery. Globally, we see companies investing in tools to monitor high-risk activities involving functions or individuals working with the government/vendor organisations. These activities are tracked to identify red flags, such as conflicts of interest, complex routing of transactions through third parties, mismatched invoices and purchase orders, back-dated contracts, unusually high payments made to counterparties, unusual phrases used for denoting facilitation payments and bribes, as well as mismatched expense claims,” Deloitte said.

“With strong enforcement of global laws, we are seeing Indian companies with global operations demonstrating a zero-tolerance culture within the organisation. In addition, many industry bodies have set up committees to help organisations identify and adopt good practices to mitigate the risk of bribery and corruption,” the report said.