Procurement fraud is the second most frequently reported form of economic crime behind asset misappropriation, according to a study.
The PwC Global Economic Crime Survey 2014 showed 29 per cent of organisations had experienced procurement fraud, and it was most common at the vendor selection stage, followed by the bid process.
The sectors reporting the most procurement fraud were state-owned enterprises, followed by energy, utilities and mining; engineering and construction; and transport and logistics.
The report, which is the first to include procurement as a separate fraud category, said three trends were driving this type of wrongdoing. These were an increase in public tender processes, companies altering their global supply chains, and a rise in outsourcing.
The report said: “In our experience, the requisitioning of goods is a ripe area for fraud. The threat is especially great in cultures where loyalty to family, schoolmates, local community or even national pride are strong influences, stronger perhaps than dry corporate policy statements or legalistic sounding codes of conduct.”
Regionally, the highest response rates for procurement fraud were Africa (43 per cent) and the Middle East (33 per cent).
Globally, 37 per cent of respondents said they had experienced economic crime, a rise of 3 per cent over the 2011 survey, and the most common area was asset misappropriation, followed by procurement and then bribery and corruption.
The survey, which included 5,128 responses from more than 95 countries, found the region reporting the most economic crime was Africa, followed by North America and Eastern Europe.
The most common methods of fraud detection were data analytics, followed by routine internal audit and risk management.
The report also referred to the “fraud triangle” of elements that are often present in wrongdoing. These were pressure, opportunity and rationalisation.
The countries reporting the highest levels of economic crime were:
1. South Africa
4. Papua New Guinea