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Dirt on the white collar

Bhupesh Bhandari

Here’s a warning for all chief executives who want to control white collar crime in their companies: keep a watch on all male employees in your office who are in the age bracket of 26 years to 40 years, earn Rs 200,000 to Rs 600,000 per annum and have been on your rolls for less than two years. After all, this is the profile of the typical fraudster in India Inc, according to consultancy firm KPMG.

In its India Fraud Survey Report 2002, KPMG has said that 92 per cent of corporate frauds (largely financial irregularities) are perpetrated by men. So are women more honest than men at the workplace? Not really.

“One of the reasons for this finding is that there are more men working in corporates than women,” says KPMG executive director Deepankar Sanwalka.

The survey, based on responses from almost 180 Indian CEOs cutting across various industries, says that 60 per cent of the fraudsters are aged between 26 years and 40 years. While 8 per cent are below 25 years, 28 per cent are in the 41 years to 55 years age bracket and 4 per cent are above 55 years.

While half the frauds are committed by people earning Rs 200,000 to Rs 600,000 per annum, another 33 per cent are committed by employees earning less than Rs 200,000. People earning above Rs 600,000 per annum account for only 17 per cent of the frauds.

Though most fraudsters play their hand within two years of their employment in a company, the report says that employees with more years of service also carry a high probability of cheating their employer.

While 35 per cent of the fraudsters had put in less than two years of service in the company, 23 per cent had put in two years to five years, 20 per cent had served for six years to 10 years and 23 per cent over 10 years.

The KPMG report is an eye-opener on white collar crime in the corporate world. It says that 51 per cent of the respondents to the survey said that they were victimised by fraud during 2001.

Sixty-one per cent felt that their organisation remains vulnerable to the risk of fraud. An overwhelming 75 per cent said that they could become a target for corporate espionage.

Particularly at risk are the financial services and ICE sectors, the report says. In the old economy (consumer and industrial markets) segment, maximum fraud-related monetary losses were attributed to expense account (37 per cent), followed by commissions/kickbacks (30 per cent) and forged documents (18 per cent).

In the financial services sector, the maximum loss was on account of false information (50 per cent), while in the ICE sector it was misappropriation of funds (22 per cent).

Keeping a check on employees is particularly difficult in some sectors. In the retail sector, for instance, about 83 per cent of the respondents said they had experienced problems with fraud of one sort or another.

That’s up from 50 per cent of retailers last year. Coming up behind was the information technology sector where 67 per cent of the companies say they’ve had problems. The financial sector brought up the rear and only 40 per cent in the sector have had a problem with fraud.

When it comes to corporate espionage, it’s the companies in the ICE sector that are looking over their shoulder. About 84 per cent say they worry about espionage. That’s compared to 81 per cent in the financial services industry and 57 per cent in the infrastructure and government sectors.

“This could be as the industry’s competitive edge lies in their intangible assets i.e. databases, knowledge pool and proprietary information, all of which are susceptible to espionage activities,” says the report.

What are the ways to combat corporate espionage? Indian companies are putting a series of measures in place to tighten security. About 52 per cent of the respondents have introduced access controls and people entering must wear identity tags.

More importantly, about 82 per cent have introduced controls on access to company information. And 79 per cent have restricted access to sensitive areas. Forty-six per cent have even introduced paper shredding as a way to stop information leaks.

At another level, 5 per cent have introduced periodic electronic surveillance to detect bug or phone taps. And another 40 per cent are taking pro-active steps to build loyalty to the organisation.

What does that include? Respondents listed steps like caring for employees, providing good financial benefits and perks. Also, many companies are now asking employees to sign non-disclosure agreements.

One change from last year — 55 per cent mentioned improved information technology as a way to prevent corporate espionage. That’s up sharply from last year when only one respondent mentioned it. About 10 per cent of the respondents say they’ve actually been victims of corporate espionage.

Should companies call in the police or any other government agencies? That’s something about which there appeared to be a consensus. Seventy-nine per cent of the respondents agreed that calling in the cops hadn’t been particularly helpful. Most said that investigations dragged on for too long and 62 per cent weren’t happy about the eventual results.

Corporate crime, in one form or another, is inevitable. But corporate India is trying to put systems in place to combat it. But, there’s clearly a long way to go.

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