Economic crime is becoming increasingly damaging to Kenyan businesses

As the Kenyan economy develops at a rate more rapid than most other countries in Africa, the country continues to be heavily plagued by economic crime. PwC’s Global Economic Crime and Fraud Survey (GECS) reveals that 75% of the respondents in Kenya have borne the brunt of economic crime over the last two years. 

Kenya is one of the largest economies in Africa, and the country’s growth over the last few years has been brought about by the diversification of its economy beyond the trade of oil and minerals – something that other economies on the continent continue to strive for.

The country has become one of the most lucrative markets in Africa to invest in, but has consequently become susceptible to the threats that accompany rapid economic progress. Cybersecurity, for instance, has become a major issue in the country, as an increasing portion of economic activity moves online.

According to GECS Kenya 2018 released by Big Four accounting and advisory firm PwC, economic crime appears to be an equally pertinent issue, with three out of four respondents to the survey indicating that they had experienced issues in this domain. The 75% ratio in Kenya is significantly higher than the global average, which stands at just under 50%.

Even more worrying is the fact that these incidents appear to be on the rise, given that the number for Kenya stood around the 50% mark two years ago. Besides rising higher than the global average over this period, the figure for Kenya is also higher than that across Africa, with the average for the continent currently at 69%.

Not only are such crimes increasing in frequency, they are also becoming more vicious. Nearly 40% of the respondents surveyed indicated that the most damaging economic attack on their organisation over the last two years led to costs in excess of $100,000 or 10 million Kenyan Shillings.

Within this bracket, nearly 15% were set back by between $1 million and $5 million, while a particularly unfortunate 2-3% lost between $5 million and $50 million. The report also revealed an overall state of unpreparedness for such attacks, given that around 15% said that the loss they suffered was unknown or immeasurable.

Much like the rest of Africa and the globe, the most common form of economic crime plaguing Kenya is asset misappropriation, which accounts for nearly 50% of total incidents in Kenya, and around 45% of the incidents in Africa and across the globe. A new addition to the GECS for the latest edition is the criteria of ‘fraud committed by the consumer,’ and it has proved a highly relevant one.

Fraud committed by the consumer accounted for the second highest portion of economic crime in Kenya at just under 40%, which is nearly identical to the figures across the rest of Africa, although such instances are less common across the globe indicated by a <30% international figure.

The third largest share of economic crime is contributed by procurement fraud, which accounts for approximately 35% of the incidents. This figure is similar for the rest of Africa, although East Africa interestingly records a particularly low incidence of procurement fraud, as does the rest of the world.  

Other major categories of economic crime include bribery & corruption, business misconduct, and accounting fraud. Cybercrime, which is the seventh most reported type of economic crime for Kenya, places second in the global scenario, perhaps due to the lag in digitalisation of the Kenyan economy.

Nevertheless, Kenya is significantly ramping up its investment in cybersecurity, given that it is predicted to become one of the largest issues over the next few years. Other types of economic crime include human resources fraud, money laundering, insider trading, intellectual property theft, anti-trust laws and tax fraud.