Economic Crimes: Procurement & Customer Fraud, Bribery, Killing Organizations In Kenya

Economic crimes are of interest to all of us, as they have an impact on businesses and the lives of citizens either directly or indirectly. Economic crime continues to be a concern for organizations of all sizes, across all regions and in virtually every sector.

The prevalence of economic crimes in Kenya is implicating dire dents on revenues and financial performance for organizations, businesses, and institutions today.  A report by PwC, however, indicates a decrease in these cases from 75% in 2018 to 58% in the last 24 months.  This figure is higher than the global average of 47%, which also saw a reduction from 2018 where the rates reported were 49%. This decrease owes to the fact that Kenyan organizations are now fast adopting a proactive approach to tackling economic crimes as the vice continues to morph and evolve. 

On the other hand, fraudsters are now getting bolder with most perpetrators said to be internal actors or collaborators between the internal and external actors in Kenya. This is a different scenario from a majority of cases globally that indicate only external actors as the main perpetrators. For instance, Companies and institutions reported forms of economic crimes that cost revenues in excess of Ksh10 million up from 23% in 2018. 

Companies in Kenya are now being warned against heightened risk emanating from third party attacks from customers, agents, intermediaries and service providers or vendors. This is after more than half of the companies participating in the survey admitted to not having a mature third-party risk management program.

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Corruption & Fraud In Kenya

Bribery & Corruption and Procurement Fraud are the most prevalent as well as the costliest and disruptive types of economic crimes experienced by organizations in Kenya. Reported incidences of Bribery & Corruption rose from 30% in 2018 to 42%, while reported incidences of Procurement fraud rose from 34% in 2018 to 39% in 2020. 

A majority of companies that reported having suffered economic crime conducted forensic investigations, 63% instituted disciplinary proceedings and/or terminated services of the implicated employees and 61% implemented enhanced internal controls.

“This is very encouraging and goes to demonstrate that Kenyan organizations are employing important strategies aimed at combatting the threat of economic crime”, said PwC’s Muniu Thoithi.

 Customer fraud is on the rise globally and remains high in Kenya. Customer fraud is especially prominent in the financial services and consumer market segments. Insurance companies and banks bore the brunt of reported customer fraud globally. Customer fraud and Cybercrime were the most disruptive forms of economic crimes globally.

 “Organisations are increasingly inviting third parties to their organizations as vendors for outsourced services, customers, etc. This has led to an increase in the threat of frauds driven by third parties, especially technology-driven frauds, giving these organizations sleepless nights”, said Peter Ngahu, PwC’s Regional Senior Partner in Eastern Africa.

 To counter the increased threat of external and technology-driven frauds, organizations have been investing in disruptive fraud-fighting technologies and the survey found that more than half of the respondents found communication and transactions monitoring to be of greatest value while a third of those that reported using Artificial Intelligence (AI), noted Biometric Authentication as the most widely and beneficial AI technology in fighting crime.

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Gathoni Kuria

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