(SINGAPORE) Fraud continues to be a major threat to companies worldwide, despite greater regulation and control. And Singapore in particular has seen more economic crime in the past two years.

Nineteen per cent of companies here reported being victims of economic crime in 2007, up from 16 per cent in 2005. And accounting fraud and asset misappropriation were listed as the most prevalent types of economic crime locally.

These are some of the key findings in PricewaterhouseCoopers' (PwC) 2007 Global Economic Crime Survey, released yesterday. For the survey, PwC interviewed 5,428 executives worldwide, including 894 from the Asia-Pacific region, of whom 76 were Singapore-based.

It found that since its last survey in 2005, Singapore companies and those elsewhere continued to do more to combat fraud. The overall number of measures have increased, as have specific preventive measures.

The number of companies here with a whistleblowing hotline, for instance, has increased from 35 per cent in 2005 to 47 per cent in 2007. And 31 per cent of companies reported their own specific fraud training, from 19 per cent in 2005.

Yet the incidence of economic crime here has clearly increased in the past two years. 'It is interesting to note that significant investment made by companies in fraud controls did not result in a dramatic decrease in the economic crime level,' said PwC Singapore's advisory partner Subramaniam Iyer.

'This could be due to the fraud controls paradox, where an increase in controls may lead to an increase in the detection of fraud cases in the short term. If you do not look you do not see. Conversely, once you know what to look for and start looking for it, you are more likely to find it. Over time, as potential fraudsters become aware of the controls in place and are deterred from committing fraud, the number of fraud cases will decrease.'

But in what suggests a growing awareness that fraud prevention and detection is not the main purpose of a statutory audit, PwC's survey results also show a decline in reliance on external auditors to discover and prevent economic crime.

As for the most prevalent types of economic crime, 28 per cent of Singapore companies surveyed put accounting fraud at the top of the list. Twenty-six per cent listed asset misappropriation, 16 per cent cited intellectual property (IP) infringement, 14 per cent pointed to corruption and bribery and 10 per cent said money laundering.

The survey also found that individuals committed fraud because of a company's weak controls, their low level of commitment to the company, their ability to use authority to override controls, their relative anonymity and a lack of clarity about the company's ethics. More than half of fraudsters were employed by the defrauded company and more than a quarter were in senior management.

PwC believes that controls alone will never be sufficient to combat economic crime, and that the answer is to establish a culture that supports control efforts and whistleblowing with clear ethical guidelines.

It found that almost half of all fraud cases were initially detected via a whistleblower hotline or some other other tip-off - highlighting the importance of a transparent corporate culture that enables employees to recognise and expose improper conduct.

'Companies need to build loyalty to the organisation, give employees the confidence to do the right thing and identify clear sanctions for those who commit fraud, regardless of their position in the company,' said Mr Iyer. 'As with all crimes and unwanted business risks, a move from after-the-fact detection and reaction towards consistent and effective prevention is the most valuable move a company can take.'

Globally, there was a slight drop in reported economic crime - from 45 per cent in 2005 to 43 per cent in 2007. And in the Asia-Pacific, the level remained unchanged at 39 per cent.

Worldwide, the average direct financial loss to companies rose more than 40 per cent to US$2.4 million, from US$1.7 million, in the past two years. Of the total loss of US$4.2 billion reported by companies over two years, 45 per cent related to companies in emerging markets such as Brazil, Mexico, Russia, India, China, Indonesia and Turkey.