Economic crime and fraud continue to plague Indian companies: PwC India

The onset of the pandemic has led to an increase in platform fraud, a novel form of economic crime that involves fraudulent activities associated with social media, e-commerce, enterprise and FinTech platforms. The surge in remote work, e-commerce, delivery applications and contactless payments has further contributed to the rise of this type of fraud. 57% of all fraud incidents in India were platform fraud. More than 26% of Indian organisations lost over USD 1 million due to platform fraud, and 44% of the perpetrators were found to commit fraud for financial gain. This is as per the second edition of PwC’s Global Economic Crime and Fraud Survey 2022: India Insights, titled “Platforms: The new frontier of fraud in India”.

Economic crime and fraud continue to be a significant challenge for Indian companies, with 66% of organisations experiencing at least one form of economic crime in the past two years as per the first edition of the report. Platforms have emerged as a new avenue for committing economic crime. The survey highlights that 99% of fraud incidents in the past 24 months have been on platforms such as financial, social media, goods, enterprises, media sharing, knowledge sharing and services.

Amongst the motives identified in such cases, financial gain is the most prevalent, with 44% of perpetrators in India engaging in such activities for monetary reasons. Brand damage is another common motive cited by 32% of the surveyed organisations, followed by competitive advantage at 21%.

Unfortunately, platform fraud is continuously evolving and spreading rapidly, which is concerning for Indian companies.

Puneet Garkhel, Partner and Leader, Forensics Services, PwC India, said: “Indian consumers and organisations have been rapidly embracing new platforms over the past few years. On average, an Indian company operates with five different platforms as part of its regular business activities today. The emergence of and surge in e-commerce, contactless payments, home delivery models, remote working, etc., have not only led to various platform-based innovations but also opened avenues of entry for fraudsters. Organisations need to be cognisant of these evolving threats and adequately invest in fraud prevention and detection strategies to safeguard themselves.”

Enterprise platforms are a prime target for malware, phishing, money laundering and ransomware. The threat of ransomware, in particular, has grown to an alarming level. Financial frauds on transactions made to or from platforms accounted for 89% of all platform frauds. These frauds vary from basic unauthorised digital purchases to more complex identity theft and triangulation fraud. Further, payment fraud, particularly through credit cards and digital wallets, accounted for 92% of all customer frauds in India. Customers also face various other types of frauds, such as impersonation, authorised push payments and application/lending fraud.

“Business leaders are often unaware of their exposure to platform fraud, as they do not view platforms as a distinct sector with common risk considerations. Instead, they treat each platform as a separate vendor with its own threat profile. As transaction processing shifts to platforms, the obligation towards security is also transferred, but many platforms are not equipped to identify, prevent and mitigate fraud like banks are,” Puneet added.

 Combating platform fraudsters

  • Four out of every ten platform frauds in India were conducted by internal perpetrators. Moreover, 26% of platform frauds involved collusion between internal actors and external perpetrators. This implies that if companies have stronger internal controls in place, over two-thirds of all platform frauds can be mitigated.
  • Fraudulent activity on platforms demands the involvement of executives and a cohesive approach that spans the entire enterprise, prioritising the ability to recover from adverse events.        A high-ranking executive should oversee the implementation of risk control policies. Leaders within the organisation should take charge of the risk management programme, especially in situations where a new threat could significantly disrupt the business.
  • Risk leaders should design a strategy for identifying, assessing and responding to fraud. This includes implementing a monitoring programme to detect anomalies and being aware of spikes in online activity or negative media coverage. It is crucial for businesses that rely heavily on platforms to pay attention to news coverage, consumer opinions and watchdog sites. Social media monitoring can also be a valuable tool for detecting potential fraudulent activity.
  • Although purpose-built transaction monitoring systems are useful for preventing and detecting issues, it is also important to have knowledge of partners’ controls, such as third-party audit reports, particularly if the exposure is significant.

With its rapid growth and increasing sophistication, platform fraud is a major threat to Indian organisations. Despite anti-fraud measures, platform fraud remains a serious and mounting threat, exacerbated by the pandemic’s impact on digital transactions. Technology offers potential solutions, such as document verification and anomaly detection, as revealed in our 2022 survey. However, the key to safeguarding against this new wave of fraud lies in building resilience into a comprehensive risk strategy.

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