Financial fraud up as 59% of Indian firms faced crimes in past two years

Indian companies reported a higher exposure to fraud (59 per cent) than the global average (41 per cent), with procurement fraud emerging as the top concern and forced labour risks

Economic crimes are increasingly disrupting businesses in India, with 59 per cent of organisations experiencing financial or economic fraud in the past 24 months, a significant increase from 52 per cent in 2022, according to PwC's Global Economic Crime Survey 2024: India Outlook report.

 

Procurement fraud emerged as the top concern, with a growing focus on mitigating bribery, corruption, and forced labour risks.

 

Indian companies reported a higher exposure to fraud (59 per cent) than the global average (41 per cent), underlining a pressing need for robust safeguards.

 

Meanwhile, globally, cybercrime continues to dominate, identified by 44 per cent of business leaders.

 

The report is based on insights from 2,446 global respondents, including 91 Indian organisations spanning industries such as consumer products, technology, healthcare, and manufacturing.

 

The growing problem of procurement fraud 

Procurement fraud, an age-old form of economic crime, now looms larger in India. Common practices such as inflated invoices, buyer-supplier collusion, and conflicts of interest were highlighted. Procurement fraud has emerged as the most significant threat, cited by 50 per cent of Indian respondents, reflecting a 21 per cent higher concern compared to global leaders. In 2022, customer fraud topped the charts, reported by 47 per cent of companies.

 

“...procurement fraud involves illegal manipulation of procurement processes for financial gain. This year, half of our respondents in India identified it as their major worry. Being one of the most disruptive economic crimes, procurement fraud cuts across industries and processes. Therefore, maintaining the integrity of the procurement process is of paramount importance as the reputation of a company rests on it,” Puneet Garkhel, partner and leader of forensic services at PwC India, said.

 

While data analytics play a growing role in combating this issue, only 37 per cent of Indian organisations have adopted real-time payment monitoring systems capable of blocking suspicious transactions, the report noted. Despite 52 per cent analysing transactions pre-deal and 46 per cent post-deal, only 44 per cent actively spot unusual bid patterns.

 

Corruption and bribery persist amid compliance gaps 

Corruption and bribery accounted for 33 per cent of economic crimes in India, with 26 per cent of respondents ranking it among the top three disruptive issues. Notably, 82 per cent of Indian business leaders expressed confidence in their anti-corruption programmes, marginally surpassing the global average of 77 per cent.

 

However, the report highlighted glaring compliance gaps. Nearly 34 per cent of companies do not conduct anti-bribery audits on third-party vendors, while 24 per cent have not done so in two years, and 10 per cent have never conducted such audits. Furthermore, 13 per cent of businesses lack a third-party risk management programme altogether.

 

The survey highlighted geopolitical tensions amplifying risks related to export controls and sanctions. While 74 per cent of Indian companies prioritised compliance, only 48 per cent provided regular updates to senior leadership. Testing programmes for sanctions compliance remained inconsistent across organisations.

 

Forced labour issue needs to be addressed 

The report also underscored the pressing need to address forced labour, which is prevalent across industries, including manufacturing, fashion, agriculture, and hospitality. While 16 per cent of Indian companies are tackling this issue and 24 per cent are evaluating it, a significant 26 per cent remain unaware of its importance. Non-compliance with forced labour laws could invite financial penalties, market restrictions, and bans on products.

 

What strategies are needed for a safer future? 

PwC’s survey outlined several key strategies to tackle economic crimes. Companies are increasingly leveraging advanced analytics to improve fraud detection, with some employing real-time monitoring to block suspicious payments. Risk-scoring, on-site assessments, and transaction reviews are also becoming integral to managing third-party risks.

 

Regular enterprise-wide fraud risk assessments, which 62 per cent of Indian companies have conducted this year, are highlighted as critical to identifying vulnerabilities. Strengthening boards' involvement in compliance efforts, with regular briefings on risk indicators, is another recommendation. Additionally, the report stresses the importance of mapping supply chains to mitigate forced labour risks and aligning business practices with global ESG responsibilities.

 

In 2024, 62 per cent of Indian businesses conducted enterprise-wide fraud risk assessments, with 15 per cent planning to do so in the next 12 months. While 52 per cent of leaders expressed confidence in their third-party risk management, only 26 per cent were “very confident.”