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The latest Ernst & Young Global Fraud Survey, which compiles results from interviews with more than 2,700 executives across 59 countries, reveals a number of surprising findings in the areas of cybercrime, bribery and corruption, and fraud.


Cybercrime:  As outlined in the E&Y survey results, one of the most significant developing threats to businesses is cybercrime.  The threat is growing, and the E&Y survey suggests organizations may not be keeping pace.  For example, nearly 50% of survey respondents see cybercrime as a very or fairly low risk to their business — 17% see it as a “very low risk,” and only 19% see it as a “very high risk.”  However, regulators and governments are painting a different picture. Mary Jo White, the Chair of the U.S. Securities and Exchange Commission ("SEC"), described cyber-security threats as of “extraordinary and long-term seriousness.”  A UK Government minister stated recently that around 93% of large organizations in the UK have faced a breach in the past financial year. According to research by the Economist Intelligence Unit, nearly a third of all businesses sampled have seen an increase in the number of attacks over the past year.  A whopping 74% of respondents stated that they had not made any public disclosure in relation to the breach, despite the increasing pressure from regulators to do so.


Bribery and corruption: As outlined in the E&Y survey results, the Foreign Corrupt Practices Act ("FCPA"), which prohibits businesses from bribing foreign officials, remains the most robustly enforced anti-bribery/anti-corruption ("ABAC") legislation globally, with the U.S. Department of Justice ("DOJ") and the SEC taking the lead in its enforcement. There have also been significant international ABAC actions over the past year, including those in Germany, Italy, France, the Netherlands, and Mexico. The Chinese government has made a high priority of eradicating official corruption, which has affected multinational firms operating in China.  Despite this regulation, bribery and corruption is common. For example, 10% of C-suite interviewees have been asked to pay a bribe in a business situation.  CEO respondents indicate that they are more likely to be asked to pay bribes than senior management colleagues, with more than one in five CEOs saying that they had been approached in the past. Yet ABAC compliance efforts may be stalling.  As reported in the survey, one in five businesses still does not have an ABAC policy, 38% of businesses never conduct forensic or anticorruption due diligence as part of their mergers and acquisitions processes, nearly half of businesses do not have a whistleblower hotline in place, and 61% of respondents have never attended ABAC training.


Fraud: As outlined in the E&Y survey results, regulators can be expected to increase their focus on financial statement fraud as the risk of such behavior is perceived to increase as businesses struggle to fulfill the resurgent growth expectations placed on them by the markets.  More than 1 in 10 executives surveyed reported their company as having experienced a significant fraud in the past two years. Ten countries recorded a significant increase, including the US (16% in 2014, up from 8% in 2012), China (8%, up from 4%), Japan (10%, up from 6%) and Russia (16%, up from 10%).  Additionally, the willingness of respondents to justify certain activities when under financial pressure shows an interesting correlation with their role. For example, CFOs are more likely than any other role to justify making changes to assumptions relating to valuations and reserves to meet financial targets (17% compared to 14% for all respondents). General counsel respondents are more likely than others to justify backdating contracts to meet financial targets (12% compared to 8% for all respondents).