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PwC Global Survey Reveals How Financial Crime Remains Major China Headache

Vanessa Doctor and Tom Burroughes

28 February 2014

In results likely to pique interests from the wealth management sector where employee trustworthiness is crucial, a survey from has found that almost four out of every five economic crimes in Mainland China, Hong Kong and Macao were perpetrated by workers at their own companies.

This is the highest proportion reported among BRICS countries that were also polled on the issue, the firm said in a study of behaviours from more than 5000 respondents from 95 countries. The results covered a variety of business sectors.

Some 27 per cent of respondents in mainland China and 16 per cent in Hong Kong and Macau report that they suffered economic crime during the last twenty-four months, compared to 32 per cent in Asia-Pacific and 37 per cent globally.

The survey reported that 48 per cent of mainland China respondents who suffered economic crime reported that procurement fraud was one of the most commonly encountered economic crimes, which most frequently occurred during the vendor selection, contracting and bid process stages.  

Asset misappropriation and intellectual property infringement also featured prominently in the survey.  In mainland China, bribery and corruption remains a persistent risk, with 39 per cent of respondents having experienced some form of bribery and corruption. Some 41 per cent of the respondents expect this figure to rise over the coming two years, the report said.

“In mainland China, some of the recurring themes in the survey were bribery and corruption and procurement fraud.  This is consistent with mainland and global authorities’ concerted and ongoing anti-corruption drive and we have already seen the Chinese government’s increasing efforts to address this,” said John Donker, PwC China and Hong Kong Lead Partner, Forensic Services.

“However, the prevalence of internal economic crime themes, including procurement and employee-driven fraud, suggests that many organisations in mainland China need to continue to focus effort on implementing and enforcing internal controls.  They need to address a lack of organisational transparency and ensure that they monitor suppliers and employee relationships,” he added.

Cybercrime and money laundering risk
Hong Kong’s business sector and significant financial services industry continue to make it a tempting target for cybercrime.  In Hong Kong and Macau, 37 per cent of respondents had suffered cybercrime. In addition, 99 per cent of respondents said that the risk of cybercrime has remained at a steady level or has increased.

“Ultimately, cybercrime is not strictly a technology problem but a strategy problem, a people problem and a process problem. Organisations are not being attacked by computers but by people attempting to exploit human frailty as much as technical vulnerability,” said Ramesh Moosa, PwC China and Hong Kong Partner for Forensic Services and Lead Partner for Forensic Technology Solutions.

The survey also shows that 37 per cent of Hong Kong and Macau respondents had encountered money laundering, three times more than regional and global averages.

Only 5 per cent of respondents who reported suffering economic crime in Mainland China, Hong Kong and Macau cited the use of data analytics and suspicious transaction analysis as ways to detect wrongdoing, compared with almost one in four doing so globally.