Kenya ranked 4th globally in list of countries worst hit by fraud

Kenya is ranked the 4th globally among countries worst hit by fraud behind Nigeria, Egypt and Namibia, a survey has revealed. According to The third Global Fraud survey by Ernest & Young (EY), most fraud incidents are perpetrated by middle-level managers.

The report indicates that over a quarter (27 per cent) of Kenyan managers in the private sector admit that their organisations have experienced a significant fraud. “This puts Kenya in the top 10 countries globally, where organisations have experienced a significant fraud,” read in part of the survey report.

The survey titled Overcoming Compliance Fatigue: Reinforcing the Commitment to Ethical Growth, further indicates that the country is also emerging as a potential hot spot for cyber crime, as Kenya leads in electronic payment systems including cashless public transport and mobile cash platforms.

The survey also points out that cybercrime poses a high risk, with Kenyan managers in the private sector seeing a heightened risk of the new vice. The survey findings indicate that 62 per cent of those polled deem it high risk to organisations like theirs. This compares to the global average of 49 per cent and an average of 51 per cent for Europe, Middle East, India and Africa (EMEIA).

“There is a huge increase in digital payments in Kenya, with 70 per cent of long-distance payments from one individual to another being made electronically. Similarly, the same percentage of payments from governments and businesses to individuals is electronic,” explained Peter Kahi, Forensic/Fraud Investigations & Dispute Services leader with Ernest &Young during the launch of the report in Nairobi.

He warns there is a risk Kenya may become a victim of its own success, with the survey prompting the question of whether risk assessment and management have kept pace with the changing trends.
In this year’s EY survey, Kenya scores strongly when it comes to implementing proactive risk assessments. It is ranked in the middle of the pack, along with Brazil and the US.

Only four per cent of Kenyan managers in the private sector think it is justified to mis-state a company’s financial performance to survive an economic downturn. This is below the global average of six per cent and the EMEIA average of 10 per cent.

Bribery and corruption cases appear to have minimal impact in Kenya’s private sector, with only one in 10 managers stating they have at one time been asked to pay a bribe. This is slightly above the global average (seven per cent), below Euro, Middle East, India and Africa’s 16 per cent and in line with the developing markets average of 10 per cent.

“There is a gap between perception and reality of doing business in the private sector in Kenya. While 86 per cent of managers perceive bribery and corruption practices to be widespread, only 10 per cent of managers have actually been asked to pay a cash bribe in a business situation,” said Herbert Wasike, Assurance Leader with EY Eastern Africa.

Only 10 per cent of Kenyan managers working in the private sector think it is justified to offer cash payments to win and or retain business. This is below the global average of 13 per cent and the EMEIA average of 15 per cent

“Anti-bribery and anti-corruption policies and communications are being heard in the private sector in Kenya,” said Kahi.

This global survey included in-depth interviews with more than 2,700 executives across 59 countries, including chief financial officers, chief compliance officers, general counsel and heads of internal audit in 52 Kenyan companies.

According to the survey, traditional fraud risks have not diminished. While new risks are emerging, compliance efforts are being maintained although risks are not being proactively mitigated. Kenyan Boards of Directors were urged to take a proactive approach when dealing with fraud within their organisations.

Incidentally, Kenya is seen as having a relatively strong culture of ethical and accurate financial reporting.