Four in ten listed companies in Thailand experiencing fraud

Stocks and Financial Services Press Releases Wednesday May 18, 2016 16:18
กรุงเทพฯ--18 พ.ค.--PwC Thailand
PwC Thailand's latest Economic Crime Survey highlights the need to tailor corporate anti-fraud policies and structures to the nation's unique fraud risks
• A majority of serious incidents in Thai companies perpetrated internally
• Cybercrime jumps to second-highest economic crime this year
Thirty-nine percent of listed Thai companies have been victims of fraud in the past year, according to PwC's 2016 Global Economic Crime Survey: Economic crime in Thailand.

The results show an alarming trend of economic crime growth, ranging from external hacking to internal employee fraud. Asset misappropriation was the most common in Thailand, constituting 78% of reported fraud compared with 64% globally.

Employees continue to be the most common perpetrators, accounting for 77% of fraudsters. Although the rate dropped from 89% in the previous study, the fraud profile in Thailand moved from middle management (56% in 2014) to junior staff. Due to increases in authority and responsibility, junior staff members were responsible for more than half of all crimes, up from 36% in 2014.

"Thai organisations need to step up their corporate anti-fraud measures to prevent, detect and combat such abuses," said Vorapong Sutanont, Forensics Partner at PwC Consulting (Thailand).

"This year's findings reinforce the need to have even stronger anti-fraud systems and better communication to staff that fraud won't be tolerated. Employee morale also plays a role in fraud risk because disgruntled staff are more likely to cheat their employers."

Vorapong, who has years of experience advising clients in Thailand, said that lack of understanding of a company's whistleblowing policy often leads management to miss red flags that could've alerted them to fraud.

"Employees must know the process for escalating red flags to proper managers with evidence. Well-defined policy will help cut across such ambiguity."
Cybercrime rises sharply
Twenty-two percent of respondents said they were affected by cyberattacks over the past two years.
In fact, the findings showed that Thailand's cybercrime rate rose sharply in 2014 and 2015, jumping from the fourth to second-highest economic crime compared with the last survey.
As more companies get involved with the Internet of Things, Vorapong said the risk from cyber threats is expected to further escalate as online attackers use the internet as the main channel to commit fraud.

Nearly 20% of cybercrime victims in Thailand reported losses of more than $100,000 (about 3.5 million baht). Another four percent lost between $1 million and $100 million (approximately 35 million to 3.5 billion baht), the findings showed, highlighting the need for business to have robust IT policies and systems in place.

Among survey respondents, loss of personal identify information is the most damaging outcome of cybercrime, followed by reputational damage, and intellectual property loss.
Bribery and corruption still a concern

Bribery and corruption were still a major concern for respondents, with 15% saying they had been asked to pay a bribe in the last two years (compared with 13% globally). The findings come on the heels of stepped-up enforcement of anti-corruption legislation such as the US Foreign Corrupt Practices Act, which targets American firms operating abroad.

Looking at the data, however, Thailand's overall bribery and corruption rate fell 20 percentage points in the survey period, with 19% of respondents reporting corruption compared with 39% in 2014 and 54% in 2011.

Such a drop is attributed to recent efforts by the government and private sector bodies to combat corruption, including the establishment of a criminal court for state officials and separate regional courts for provincial corruption matters. It's expected that the Council of State will pass an executive decree to address corruption by the end of 2016.

"Thailand has sought to strengthen its anti-corruption policies, legislation and enforcement in recent years," Vorapong said. "Increasingly, we've seen regulatory and law enforcement agencies are holding officials and companies accountable for corrupt activity, and we expect this trend to continue."

As for multinational companies, Thailand is generally a business-friendly jurisdiction.
However, Vorapong suggested that understanding Thai business practices is crucial to avoid committing unforeseen fraud and misconduct.
"Foreign companies with operations in Thailand are especially susceptible to all types of economic crime. Some of this can come down to lack of experience with the local culture and practices."

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