Insights & Reports > Kroll Global Fraud Report

Change is always taking place, but from time to time the world sees huge shifts which completely recast how we live and work. The stock market crash of 1929 ushering in the Great Depression, or the political upheaval following the fall of the Berlin Wall in 1989 are just two examples. The recent financial turmoil – as the credit crunch arising out of the subprime lending follies has finally begun to bite the real economy – may herald another such moment. How deep the coming recession will be remains unclear, but the economic landscape has certainly changed completely from that of recent years.

Some constants remain, however, including the ongoing risk of fraud. Market downturns traditionally reveal crimes which took place in preceding boom years, but even while doing so they provide new opportunities for criminals and different vulnerabilities for companies. Fraud remains, but its forms change, and successful anti-fraud strategies must too.

Although covering a range of issues, the articles in this edition of the Global Fraud Report all seek to shed light on aspects of the new terrain in which we currently find ourselves.

First, it is important to understand how we got here, and this requires a focus on events in the United States. As several of the pieces show, fraud was part of the story. It invariably is in an over-heated market, where the usual mix of poor judgment and poor regulation that accompanies economic bubbles is fertile ground. If history is any guide, in the near future American companies can expect new rules, tougher enforcement, and battles with shareholders – both ordinary ones and governance activists – as everyone tries to apportion blame and prevent a similar crash in future.

Although the upheaval began in the United States, the impact has already gone much further. This is the first major downturn since the rise of emerging economies began to reshape the way in which the world does business. How things play out here will be of particular interest. Stock markets in these regions have suffered even more than those in the developed world, and while these countries will certainly feel pain they may still see some growth. Reports from Brazil, India, and China shed light on ways that the new conditions are affecting the fraud environment and anti-fraud strategies in leading emerging markets, with lessons for those operating there as well as for companies in the rest of the world.

Finally, unlike during the Great Depression, governments so far seem determined to keep down trade barriers and maintain the global marketplace to which the world has become accustomed. The benefits of freer trade remain, but so do the challenges. Even in the new economic environment, companies will have to address how conflicting national laws and interests complicate trans-boundary fraud issues, from fighting corruption at the state level to running investigations inside multinational organizations.

Nobody has a map to the new world we find ourselves in, but the articles in this edition of the Global Fraud Report should help companies prepare for the emerging challenges.

It's a different world out there, and fraudsters know it