Kenya lost Sh5.5 billion to fraud in last two years

Thursday, March 5th, 2020 00:00 |
PwC Eastern Africa advisory and forensics services leader Muniu Thoithi (left) with regional senior partner Eastern Africa Peter Ngahu during the release of the PwC Global Economic Crimes Survey in Nairobi, yesterday. Photo/PD/ALICE MBURU

Zachary Ochuodho @zachuodho

Kenya has lost about Sh5.5 billion in the last two years mainly to economic crimes in public and private sectors, a survey by PwC on Economic Crimes Survey 2020 shows.

The study says most perpetrators of economic crimes in the last 24 months were internal actors at 36 per cent with external actors accounting for 27 per cent of the reported cases.

“We noted that one in three respondents reported being victims of collusion between the internal and external actors.

It goes against what our respondents reported globally where external fraudsters were the main perpetrators of fraud,” said PWC advisory and forensics leader, Eastern Africa Muniu Thoithi.

He said the survey released yesterday shows most economic fraud – mainly bribery and corruption - and procurement fraud were internally originated. 

Vendor audit

“Incidences of procurement fraud in Kenya are more than double the global average with procurement fraud  being the most disruptive,” said Thoithi.

Thoithi said emerging fraud cases were contrary to what happens globally - where customer fraud and cybercrime lead the pack. 

He said cases of inflated contracts, fraudulent and corrupt deals and collusion in many of the organisations have to lead to losses.

PwC report says incidences of bribery and corruption rose from 30 per cent in 2018 to 42 per cent, while reported incidences of procurement fraud increased from 34 per cent in 2018 to 39 per cent this year.

It reveals that despite the rise, 70 per cent of the respondents in Kenya said they have invested in programmes aimed at curbing bribery and corruption.

“The deliberate investments in anti-bribery programmes may be paying off given the ability of organisations to detect and report this vice.

This may have contributed to the reported increase in incidences of bribery and corruption,” he said.

Eight out of 10 Kenyan respondents that reported having suffered economic crimes, conducted forensic investigations, 63 per cent instituted disciplinary proceedings or terminated services of the implicated employees and 61 per cent implemented enhanced internal controls, the report says.

Thoithi said the move was encouraging and a demonstration that Kenyan organisations are employing important strategies aimed at combating the threat of economic crime.

He said globally, customer fraud was on the rise and remains high in Kenya. 

“Customer fraud is especially prominent in the financial services and consumer markets segments,” he said.

Vendor audit

PwC’s regional senior partner in Eastern Africa Peter Ngahu said insurance companies and banks bore the brunt of reported customer fraud globally adding that customer fraud and cybercrime were the most disruptive forms of economic crimes the world over.

“Organisations are increasingly inviting third parties to their organisations as vendors for outsourced services.

This has led to an increase in the threat of fraud driven by third parties, especially technology-driven crime,” said Ngahu.

He said to counter the increased threat of external and technology-driven fraud, organisations have been investing in disruptive crime-fighting technologies.

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