As businesses navigate the complex landscape of Swiss commerce, understanding the prevalent fraud trends is paramount. This article provides an in-depth analysis of evolving fraud patterns in Switzerland, including global trends, key insights and innovative solutions to protect your business.
Let's explore the latest fraud trends in Switzerland and discover actionable insights to protect your business. We'll uncover the interconnected storylines of white-collar crime, the rise of AI in fraud prevention, the dark side of responsible investing and the importance of whistleblowing channels in maintaining integrity.
Get a quick understanding of the prevailing fraud dynamics in the country and worldwide.
Two main sources were used in the research. The main source for a more global view of fraud was the report published in 2024 by the ACFE (Association of Certified Fraud Examiners), which includes a worldwide study and numerous inputs on fraud such as type of perpetrator, typical behavior of a fraudster etc. At a national level, the data is taken from the previous Fraud Barometers created specifically for the public. The data was grouped to show a general timeline to highlight potential trends.
Swiss Fraud Landscape vs. International Trends
Evolution of asset missapropriation subschemes' losses
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Median Loss Worldwide
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The two graphs show the evolution of the sub-schemes used by perpetrators worldwide. It should be noted that even though the number of sub-schemes has increased in recent years, the median loss has fallen dramatically.
However, a possible explanation for the high loss in 2020 was the COVID-19 pandemic, which led to several companies committing accounting fraud.
Types of Perpetrators in Switzerland
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Median Loss in Switzerland
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The first chart shows a condensed version of KPMG’s previous fraud barometer, identifying the different types of perpetrators in Switzerland. The second chart also shows the median loss caused by fraud.
As it can be seen, in 2022, the loss dramatically increased compared to the trend of the previous years. The data has been taken from the ACFE Reports (Worldwide) and the KPMG Forensic Fraud Barometers (Switzerland).
The noteworthy spike in accounting fraud in 2022 can be explained by a high-profile case in the canton of Geneva – a French billionaire owed the Genevan tax authorities $410 million.
ESG Fraud
As Environmental, Social, and Governance (ESG) principles gain momentum in investment decisions, so too does the specter of ESG fraud. Recent scandals expose the harsh truths behind seemingly virtuous companies.
- Child labor in Africa: one example of ESG fraud involves allegations of child labor in a supply chain, spotlighting the challenges of ensuring ethical practices in global commerce. This case serves as a reminder that companies that appear virtuous can engage in unethical behavior.
- Greenwashing in Switzerland: another form of ESG fraud is greenwashing, where companies exaggerate or fabricate their environmental credentials to attract investors. This deceit highlights the need for increased oversight and accountability and reduces confidence in genuine sustainability initiatives.
- CO2 tax controversy: controversies over CO2 taxes have also sparked outrage, signalling a clash between economic interests and environmental responsibility. This highlights the delicate balance that must be considered when implementing ESG principles and the potential for conflicts of interest.
- Carbon offset conundrum: the effectiveness and potential for abuse of carbon offsets have sparked debate. It is essential to ensure transparency and oversight to prevent fraudulent practices and maintain the integrity of ESG initiatives.
In summary, the rise of ESG fraud underscores the importance of vigilance and demand for accountability in responsible investing. Scrutinizing claims of ethical and sustainable practices, conducting thorough due diligence, and promoting transparency in reporting are essential to navigating the complexities of responsible investing with integrity.
The Dual Role of AI: A Tool for Both Fraud and Fraud Prevention
AI has become a hot topic in recent years. While it has many benefits, AI also has some drawbacks especially when it comes to fraud. Deepfakes, misinformation or corporate espionage are examples of how AI is used to commit fraud. Additionally, the emergence of AI-driven tools such as burglar bot AI or the concepts of data poisoning or AI market bombing are reshaping the cyber threat landscape.
Indeed, a study conducted by the WEF involving 199 respondents, 56% of respondents expected generative artificial intelligence (AI) to provide an overall cyber advantage to attackers in the next two years. However, AI is increasingly used to prevent fraud. AI-based fraud detection systems are becoming more sophisticated, capable of analyzing vast amounts of data in real time to identify suspicious activities.
As a matter of fact, in another survey conducted by the ACFE, involving 1,187 respondents, 83% of them expect to implement generative AI as part of their anti-fraud program in the next two years.
The use of AI in cyber security is expanding rapidly, offering both threats and solutions. AI threats continue to evolve, posing new challenges for cyber security professionals, but AI-driven technologies are also enhancing the ability to detect and respond to fraud more effectively. Leveraging AI for both offensive and defensive purposes will be crucial in maintaining cyber security and protecting against various forms of fraud.
Swiss Governance: The Alarming Surge in Cybercrime
Economic crime experienced a significant surge in 2023, particularly in the digital realm. A substantial portion of cybercrime was attributed to financial offences, with digital economic crime constituting a significant portion. This category saw a 36.5% increase compared to the previous year.
The rise in economic crime was primarily driven by various forms of fraud. Phishing and social engineering surged by 69.8%, while the abuse of online payment systems and identity fraud increased by 66.1%. Similarly, the number of fraudulent transactions on classified ad platforms rose by 23.1%.
These trends indicate that white-collar crime, especially in the digital realm, continues to be a growing challenge, that requires enhanced prevention and enforcement measures.
KPMG Whistleblower Channel: Your Fraud Prevention Solution
KPMG offers a comprehensive solution for effective whistleblower management through its managed services. These services ensure compliance with regulatory requirements and provide scalable solutions tailored to the specific needs of organizations. KPMG's expertise in GDPR compliance and adherence to the EU Whistleblower Directive ensures that secure channels are in place to quickly detect and prevent fraud.
While there have been significant gains in fraud detection through whistleblowing in recent years, the implementation rate of hotlines remains insufficient across Western Europe. KPMG recognizes the importance of a robust reporting mechanism and can assist organizations in testing, assessing, and evaluating the effectiveness of their existing whistleblowing hotlines and reporting mechanisms. This helps identify any gaps or areas of improvement.
Additionally, KPMG can support organizations in the development of a whistleblowing system that incentivizes and enables individuals to report suspected fraud while protecting assets.
In addition to these services, KPMG also offers expertise in ISO 37002, which is an international standard for whistleblowing management systems. The standard provides guidelines for establishing, implementing, maintaining, and improving effective whistleblowing management systems. KPMG can help organizations align their whistleblowing practices with ISO 37002, ensuring that they meet international standards and best practices in this area.
Overall, KPMG's whistleblower solutions, combined with its expertise in GDPR compliance, the EU Whistleblower Directive, and ISO 37002, provide organizations with a comprehensive fraud prevention solution. By partnering with KPMG, organizations can enhance their whistleblowing mechanisms, improve fraud detection and ensure compliance with regulatory requirements.
How to address these challenges?
To address these challenges, the escalation of ESG fraud underscores the imperative for relentless vigilance and robust accountability within the responsible investing community. Instances of the exploitation of child labor, greenwashing tactics, CO2 tax controversies and carbon offsetting challenges serve as powerful reminders of the critical importance of conducting thorough due diligence and facilitating transparent reporting mechanisms to navigate ESG principles with integrity. Investors must exercise prudence and carefully evaluate claims of ethical and sustainable practices to ensure alignment with corporate values.
In addition, the alarming rise in digital economic malfeasance, particularly cybercrime, requires enhanced prevention and enforcement measures. The significant increase in phishing attacks, fraudulent transactions, and identity theft underscores the importance of pre-emptive action to stay ahead of emerging threats. The use of cutting-edge technologies, such as generative AI, holds great promise for combating fraud and mitigating associated risks.
In conclusion
Organizations must prioritize cyber security and fraud prevention by investing in robust infrastructure and comprehensive employee cyber security training.
Collaborative efforts between the public and private sectors are essential to facilitate seamless information sharing, cultivate best practices and strengthen the collective defense against fraudulent activity.
Through sustained vigilance, collaborative synergies, and unwavering accountability, a resilient financial landscape rooted in integrity and trust can be achieved, ensuring a sustainable and secure future.
Take Action: Secure Your Business Today
Take action today to protect your business from fraud risks and ensure a secure future. Here's what you can do:
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Stay informed
Stay on top of emerging fraud trends and evolving threats. Educate yourself and your team on the latest tactics and technological advances in fraud prevention.
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Assess vulnerabilities
Conduct a thorough fraud risk assessment to identify potential vulnerabilities within your organization. Ensure that your internal processes and controls are strong and efficient by evaluating them.
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Implement strong controls
Strengthen your internal controls to reduce the risk of fraud. Implement segregation of duties, regular monitoring, and effective reporting mechanisms to detect and prevent fraud.
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Train your team
Provide your employees with comprehensive anti-fraud training. Educate them on the warning signs of fraud and the importance of reporting suspicious activities promptly.
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Partner with Experts
Seek guidance from trusted professionals such as the KPMG's Forensic department. They can provide expert advice, tailored solutions and ongoing support in fraud risk management and forensic consulting.
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Foster a culture of integrity
Promote a culture of transparency, accountability, and ethical behavior within your organization. Encourage employees to speak up and report any suspected fraudulent activity through confidential reporting mechanisms.
Don't wait until fraud strikes
Take proactive steps to protect your business against evolving threats. Connect with practice for expert guidance and tailored solutions in fraud risk management. Together, we can fortify your organization's defenses and ensure a secure and resilient future.
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