FRAUD AND ECONOMIC crime in Philippine businesses fell but remained high in the last two years with the deployment of AI-based fraud detection systems remaining limited, PwC Philippines said in a report released Tuesday.
The 2020 Isla Lipana & Co./PwC Philippines Economic Crime and Fraud Survey found that 42% of respondents said their companies experienced incidents of fraud between 2018 and 2020.
The report, which is part of a global survey, found that the percentage fell from 54% in the 2018 report, though the new study’s sample size has grown to 101 from 63.
PwC views the rate as “remaining the same,” PwC Philippines Technology and Risk Consulting Partner Roberto C. Bassig told reporters at a news conference.
PwC’s survey took in respondents from across industries, including managers, chief executive officers, and chief financial officers, among others.
According to the global report, fraud incidents resulted in average losses of $100,000 per business over the past two years, with 31% of incidents costing between $50,000 and $100,000.
The top economic crime in the Philippines remained asset misappropriation, with 52% of respondents saying their companies have experienced such incidents.
Bribery and corruption, and customer fraud, were both at 42%.
Some forms of fraud declined significantly since the 2018 report, with incidence of procurement fraud falling to 21% from 35% and deceptive business practices falling to 19% from 38%.
Cybercrime jumped to 19% from 9% in the 2018 report.
Some 21% of respondents said their organization has been asked to pay a bribe, and 14% said that they lost an opportunity because they believe a competitor paid a bribe.
PwC Philippines Chairman and Senior Partner Alex B. Cabrera said that companies should have risk-management officers to identify problems, whether traditional or digital.
“If you have a dedicated risk-management person that also takes care of that, then I think you can avoid the habit of presumption. There is a lot of presumption because the president sees things in the ordinary course of business and doesn’t really do a deep dive on the details (to) find out what’s wrong,” he said.
The report said that the main perpetrator is usually an insider, accounting for 38% of incidents. Collusion between internal and external actors make up 21% of incidents.
In Southeast Asia, 39% of internal perpetrators are in the operations staff, and 38% are in middle management while 17% are in senior management. There are no available Philippine data due to the size of the survey sample, PwC said.
The “tip-off” remains the main source of fraud detection in an organization, as 25% of respondents say costs are preventing companies from upgrading technology to combat financial crime.
Only a small percentage of companies is currently using artificial intelligence to counter fraud, with 40% of companies planning on using voice recognition in the next 12 months and 39% planning on using natural language generation-based systems.
Mr. Cabrera said that he expects the problem in the Philippines to get worse before it gets better.
“The willingness to invest and the preparedness to take on security costs is not yet there. And then probably corporates also needs to see the cost of security go down from these service providers,” he said.
“I still think there’s an inherent defect on how we treat it as a culture… how we handle those fraud incidents.”
PwC is advocating for the criminalization of corruption within private companies.
“Private corruption is technically not a crime,” Mr. Bassig said, even though there are financial implications.
“We’re pushing forward, of course, with this initiative to criminalize this aspect and hopefully it will also help decrease the financial crimes B2B.” — Jenina P. Ibañez