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Fraud in companies fuels private probes

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Nearly half of Kenyan companies are at risk of losing money in fraud and corruption incidents. FILE PHOTO | NMG

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Summary

  • PwC’s Global Economic Crime and Fraud Survey shows 44 percent of Kenyan companies experienced economic crimes in 2020.
  • The report shows that majority of the firms that caught the culprits relied on some form of internal inquiries or hired specialist sleuths to investigate their organisations.

Nearly half of Kenyan companies are at risk of losing money in fraud and corruption incidents, fuelling the growth of private investigators hired to probe economic crimes.

PwC’s Global Economic Crime and Fraud Survey shows 44 percent of Kenyan companies experienced economic crimes in 2020.

The report shows that majority of the firms that caught the culprits relied on some form of internal inquiries or hired specialist sleuths to investigate their organisations.

Corporates are turning to private investigators to do background checks on businesses before committing to investment and probing their organisations for corruption and fraud attracting individual outfits and big audit and advisory companies to offer the services.

“About 78 percent of Kenyan respondents that reported having suffered an economic crime conducted an investigation,” reads part of the PwC report.

Foreign and local investors are turning to private sleuths for business intelligence, risk compliance, investigation, background screening, checks and due diligence to avoid losing money in foiled investments.

The investigators claim they can help track improper payments, analyse data and carry out forensics to uncover anomalies and give actionable intelligence on newly acquired businesses or joint venture partners.

The trend follows many investors losing huge sums of money buying into businesses that collapse soon after they are bought or are fraught with undisclosed fraud.

The investigators have also become hot cake for investors targeting private businesses operating without disclosures or audits making it difficult to get the true picture of the company operations at face value.

The demand for private investigators has seen top business advisory firm set up investigations units including Ernst and Young, PriceWaterHouseCoopers, Deloitte and Touche, and KPMG.

“EY teams of investigators, forensic accountants, compliance specialists and technology professionals can help companies respond rapidly to instances of alleged fraud, bribery and other misconduct, as well as provide support throughout any subsequent regulatory, civil or criminal proceedings,” the company says on their website.

PwC claims they have a regional team of specialists that has conducted some of the most complex and high-profile investigations undertaken in Kenya and regionally in recent years.

Many investors have lost huge sums of money due to insufficient due diligence on business acquisitions.

Other companies have suffered losses to internal parties who in Kenya were reported to have been the most common perpetrators of economic crime unlike globally where the incidents by external perpetrators were higher.

Fraud committed by operations staff was the highest of the fraud attributed to internal actors at 53 per cent.

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