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Redundancy fears increase threat of economic crime and fraud

6 July 2010

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The fear of redundancy and job losses are the main reasons behind an increasing economic crime and fraud in public sector bodies, new research has found.

More than half of the UK respondents (52%) said their company had suffered economic crime over the last year, compared with a global average of about a third (32%), according to accounting firm PricewaterhouseCoopers (PwC).

Of these, four in five (80%) reported the theft of assets, such as cash, supplies or equipment, while four in 10 cited incidents of financial statement fraud. These measures are both significantly higher in the UK than the global average.

PwC LLP forensics director Richard Neave said: “Over the last few years, we have clearly seen the direct effect of economic pressures on people’s ability to rationalise fraudulent actions – neither the private nor the public sector are immune.”

The new government announced a range of cuts in the recent emergency Budget aimed at tackling the UK’s £155bn annual deficit.

More than 170 senior representatives in 35 countries around the world took part in the survey, including 44 in the UK.

A majority of UK respondents reported increases in levels of economic crime over the last 12 months, and most believe their organisations are at greater risk in the current economic environment.

Fraud is mainly perpetrated by more junior members of staff in the public sector, the report finds, although this may change as austerity cuts begin to bite.

Linking pay to performance is also likely to be a driver of fraud, with the report finding that organisations employing this pay structure for senior executives are almost twice as likely to have reported fraud (44%) compared with those that make no link (27%).

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