What is the crime risk

White-collar crimeCorporations are too carefree

Almost every second German company has suffered damage from embezzlement, corruption or other forms of white-collar crime in the past two years. The risk of crime is particularly high in the E7 countries of China, Russia, India, Indonesia, Brazil, Mexico and Turkey. This is the result of the representative study "White Collar Crime 2007" by the auditing and consulting company PricewaterhouseCoopers (PwC) and the Martin Luther University Halle-Wittenberg.

Steffen Salvenmoser, partner at PwC in the area of ​​Forensic Accounting Services and former public prosecutor, describes the dimensions:

"The financial damage per crime in the emerging countries is almost three times greater than in a global comparison. It is all the more astonishing that German companies in the emerging markets continue to act more carelessly than foreign competitors."

Due to the number of companies participating in the survey, a statement can be made about the amount of economic damage that goes beyond a mere estimate for the first time. Professor Kai Bussmann, holder of the chair for criminal law and criminology at the Martin Luther University Halle-Wittenberg:

"The total damage that German companies suffer from the crimes uncovered around the world is estimated by the study to be a good six billion euros annually."

The proportion of injured respondents remains high and rose from 46 percent in the 2003/2004 study period to 49 percent. According to Salvenmoser, the reasons for the increase are not only due to an increase in crime, but also to more effective controls in companies. Amazingly, only ten percent feared becoming victims of white-collar crime themselves.

Around every third criminal offense discovered is not reported, and in the case of corruption, German companies only call in the public prosecutor in every second case. It is obviously the Concern for the company's reputation an important reason for the reluctance, especially since only half of the reported offenders are actually convicted.

For the "Global Economic Crime Survey", PwC surveyed 5,428 companies worldwide, including 1,166 in Germany. The survey is the largest study of its kind in the world and is being carried out for the fourth time within eight years. It includes all criminal offenses discovered from 2005 to spring 2007 and is therefore more comprehensive than the crime statistics, which can only take into account the offenses that have been reported.

Industrial espionage is exposed more frequently

In 2005 and 2006, German companies uncovered cases of product piracy and industrial espionage much more frequently. The proportion of respondents affected rose to 18 percent, compared to 13 percent in 2003/2004 and eight percent in 2001/2002. 33 percent of the companies reported embezzlement and fraud, a similar number as in previous periods. Corruption damage was discovered by ten percent of those surveyed.

In the E7 countries, the reported claims including the management costs for claims settlement amounted to almost 4.4 million euros per company. In contrast, the other countries suffered an average of 1.6 million euros in damage. Nevertheless, German companies rarely consider the risk of crime when investing in emerging markets.

In the case of planned investments in China, for example, only 31 percent of German companies dealt with the topic in the past, while 48 percent of investors from other countries did so. At the same time, German companies in China suffered significantly higher financial losses from white-collar crime (an average of EUR 3.66 million) than investors from the rest of the world (EUR 1.33 million).

Control deficits persist

In an international comparison, German companies still have some catching up to do when it comes to fighting crime. Claudia Nestler, partner at PwC in the Forensic Services division, reports:

"Abroad, criminal acts are more often uncovered through systematic controls."

Nevertheless, almost half (47 percent) of those surveyed in Germany do not consider any major changes to the control infrastructure necessary in the next two years, while 35 percent in Western Europe and only 19 percent of companies in North America believe this.

German companies also act relatively carelessly in emerging markets. In China, for example, only 39 percent of the German respondents have intensified their control measures in the past two years, compared to 53 percent of the other foreign companies. At the same time, 41 percent of German companies see no need for action in the next two years, while only 25 percent of companies share this view in an international comparison.

Ethics guidelines work

The deficits of German companies are even more evident than with the controls Crime prevention to days. Although 61 percent of those surveyed now have ethical guidelines, only 37 percent have one Compliance program. In North America, on the other hand, ethical guidelines are not only in place in 94 percent of companies, they are also monitored much more frequently by a compliance program (73 percent).

The study results also show that such regulations are effective. Worldwide, only 38 percent of companies with ethical standards and compliance programs were victims of white-collar crime; in the comparison group without appropriate preventive measures, the proportion reached 54 percent. Nestler advises:

"German companies could significantly reduce the damage caused by crime if they gave up their reservations about prevention programs and changed their corporate culture accordingly."

Every second perpetrator comes from the company

Another argument in favor of greater crime prevention in companies is that almost every second crime is committed by the company's own employees. The other perpetrators are usually in contact with the company concerned as customers, suppliers or business partners; criminal offenses by strangers are rather rare.

The typical white collar criminals in Germany there is a man (87 percent of the perpetrators), between 30 and 50 years old (79 percent) and has been with the company for more than six years (57 percent). Almost a third of the perpetrators have even been employed for more than ten years. Around 20 percent of the perpetrators come from senior management, another 25 percent from middle management.

Top managers are more likely to go unpunished

It is noticeable that perpetrators from top management in Western Europe have to reckon with a criminal complaint much less often (40 percent of criminal cases) than employees below the management level (61 percent). In Germany, there is no such difference in treatment, but 23 percent of German companies state that they respond to perpetrators from upper management in a good five cases, both in response to complaints and internal sanctions such as warnings, dismissals or transfers have waived.

By contrast, criminal acts by middle management and other employees remained without consequences for the perpetrator in only five or three percent of the cases. If it comes to trial, however, executives can in no way hope for preferential treatment in court. Rather were Prison sentences are significantly more common against senior and top managers imposed (62 percent) than against other employees (31 percent).

dw; Source: PwC; Image: fotolia