The global financial services industry has seen a notable increase in fraud activity in the wake of the financial crisis, new research finds.

According to the latest edition of the Kroll Annual Global Fraud Report, the worldwide fraud rate remained steady in 2009, but five sectors saw their level of fraud losses rise — financial services, professional services, healthcare, pharmaceuticals & biotechnology,retail, wholesale & distribution, and travel, leisure & transportation.

Five sectors reported declines: manufacturing; technology; media & telecoms; natural resources; and consumer goods & construction.

The financial services sector’s combined average losses to fraud over the last three years rose to $15.2 million, up 18% from the 2008 survey. The number of companies in the sector suffering at least one fraud rose to 87% from 79%. Most notably, it found that over one-half of respondents indicated that the crisis had led to an increase in the number of cases of fraud at their companies.

Overall, it said that 30% of companies reported the current economic climate had directly increased their exposure to fraud over the past 12 months, with only 5% reporting a decline. Of all the regions surveyed North America experienced the highest incidence of fraud as a result of the global financial crisis (32%).

“Traditionally every downturn brings about a rise in fraud, but what we are seeing in 2009 is something far more complex. Companies are seeing greater vulnerability due to reduction in internal controls, pay cuts and reduced revenue across the board, but counteracting this increased risk are the realities of today’s constrained business environment, where factors such as high staff turnover, entry into new markets and inter-firm collaboration are far less common than in years past. In short, the current economic crisis has increased the motive for fraud, but decreased the opportunity,” says Blake Coppotelli, senior managing director in Kroll’s Business Intelligence and Investigations unit.

The findings are based on a survey Kroll commissioned from the Economist Intelligence Unit. A total of 729 senior executives took part in this survey.

IE