Insights & Reports > Kroll Global Fraud Report

At is difficult, at first glance, to see anything positive in the fraud survey figures from the Middle East and Africa. Once again the region is by far the worst affected.

• For seven out of ten frauds covered in the survey – corruption and bribery (affecting 34% of regional respondents); vendor fraud (33%); management conflict of interest (31%); financial mismanagement (31%); internalfinancial fraud or theft (27%); IP theft (22%); and money laundering (12%) – the Middle East and Africa had the highest incidence of any region. The number of companies hit by the remaining three frauds was, in each case, also above average.
• For five out of ten frauds, the region also has the most companies considering themselves highly vulnerable: corruption and bribery (27%); vendor fraud (22%); theft of physical assets (17%); IP theft (16%); and financial mismanagement (14%).
• The Middle East and Africa saw the most companies whose vulnerability increased due to high staff turnover (36%); weaker internal controls to save money (27%); pay restraint resulting from reduced income (21%), and reduced revenue in general (16%).
• The average loss per company over the last three years more than doubled from the 2008 survey figure, from $5.6 million to $11.5 million, although this came as a result of an increase in the number of respondents with losses over $100 million rather than as a result of an across the board shift upward.

On the other hand, last year’s survey figures were in some respects even worse, and companies are taking steps to address the problem.

• Of the ten categories of fraud, three were more prevalent among survey respondents this year, including notably vendor fraud which rose in incidence from 24% to 33%. Three, however, stayed roughly the same, and four actually dropped. The latter included last year’s two most widespread frauds: theft of physical assets (down from 46% to 38%), and management conflict of interest (from 43% to 31%). 36% of respondents saw a drop in fraud at their companies, against 28% who observed an increase.
• The number of firms reporting increased vulnerability to fraud as a result of high staff turnover and weaker internal controls was also down.
• With the exception of IP protection measures, a greater proportion of regional companies than average will be investing in every anti-fraud strategy listed in the survey, including notably IT security (58% of regional companies compared with 51% on average), and physical asset security (56% to 37%).

It would be wrong to characterize the fraud situation in this region as anything but extremely serious. It is, however, fair to note some improvements. Moreover, companies certainly have not given up.

Spotlight on Nigeria

Fraud incidence in Nigeria broadly mirrors that in the region as a whole. The two biggest exceptions are: money laundering, which affected 19% of Nigerian respondents in the last three years compared to 12% across the region and just 5% of the whole survey; and IP theft (30%, compared to 22% and 14% respectively). Although Nigerian companies are more likely than those in their region or globally to feel highly vulnerable to both frauds, they are tackling money laundering more actively than IP theft.

Some 93% of companies in the country have financial controls in place (compared with 82% globally), but only 30% of Nigerian respondents have IP protection measures in place (compared with 36% worldwide). As IP theft, piracy, and counterfeiting are rising in the Middle East and Africa, this could make them even more vulnerable than they are now.