DelhiDesk Research by Crowe and the University of Portsmouth suggests that fraud costs businesses and individuals across the world more than $5tn each year, nearly 60% of what the world spends annually on healthcare. Fraud can be motivated by greed, pressure to exceed analysts’ expectations, and the desire to paper over small financial cracks that spiral out of control. While economic booms help fraudsters conceal creative accounting, recessions expose wrongdoing. World events, such as Covid-19, have created new opportunities for fraudsters. To reduce fraud, corporate boards and investors need to ask more questions, regulators need to be more skeptical, and whistleblowers need to be protected.
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👉 Theranos is just one of many financial scandals that have made headlines in recent years, including Wirecard, Abraaj, various crypto-heists, and misappropriation of government handouts during the pandemic.
👉 Crowe and the University of Portsmouth estimate that fraud costs businesses and individuals over $5 trillion each year, nearly 60% of what the world spends annually on healthcare.
👉 Greed, market pressure, and a desire to exceed expectations can drive fraud, as can world events like the pandemic and remote working.
👉 Corporate boards, investors, regulators, and governments need to be more skeptical and encourage whistleblowers to come forward.
👉 Protections for whistleblowers are strongest in the US, which offers bounties for information leading to fines or imprisonment, but legal protections are still patchy in much of Europe and elsewhere.
👉 Fraud can be reduced by better understanding who commits it, educating people on how to report it, and ensuring policies protect whistleblowers. Until then, financial crime will remain a multi-trillion-dollar scourge.
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