The number of financial services firms that are victims of fraud and security breaches is growing by leaps and bounds with nearly nine out of 10 reporting problems in 2016, according to Kroll, a risk investigations and consulting firm based in New York City.
Financial firms are subject to a wide variety of fraud and security incidents, both from employees and outside the company, says the "Kroll Annual Global Fraud and Risk Report," which included responses from 545 executives from financial services companies worldwide.
Eighty-nine percent experienced fraud incident in the past year, the report says. This compares with 70 percent in 2015. the average revenue loss was 0.5 percent.
“Fraud, cyber and security incidents are now the ‘new normal’ for financial services companies across the world,” Kroll says.
Theft of physical assets is the most prevalent kind of fraud suffered in the sector, reported by 39 percent of respondents. This is followed by vendor, supplier or procurement fraud at 32 percent.
Other types of fraud include information theft, vendor fraud, misappropriation of company funds and intellectual property theft.
“This year’s report shows that it’s becoming an increasingly risky world, with the largest ever proportion of companies reporting fraud and similarly high levels of cyber and security breaches,” says Tommy Helsby, co-chairman, Kroll Investigations & Disputes. “The impact of such incidents is significant, with punitive effects on company revenues, business continuity, corporate reputation, customer satisfaction and employee morale.”
Despite widespread concerns about external attacks, the report says the most common perpetrators (60 percent) of fraud, cyber and security incidents were current and former employees.
Insiders are also the most likely to discover problems, with 44 percent discovered by whistleblowers and 39 percent by internal audits, Kroll says.