Canada is one of the most fraud-free countries in the world, according to a recent study, but internal threats and online attacks are serious concerns at home and abroad.
A report released Tuesday from Kroll Advisory Solutions noted that Canada had the lowest levels of fraud, based on the response of the 839 professionals in the countries it polled around the world. The overall prevalence of Canadian fraud cases–from money laundering to information theft –“dropped much more quickly than elsewhere so that fewer than half of businesses were hit in the past year,” the report noted. “On average, Canadian firms lost just 0.6 per cent of revenues to fraudsters.”
That figure is down from the 0.9 per cent researchers found last year, and significantly less than the 1.1 per cent in the U.S. Moreover, the prevalence of fraud in Canada declined from 70 per cent in last years results to 47 per cent this year.
That is in line with the global trend of decreased fraud occurrence that Kroll found; the percentage of companies that experienced an incident dropped to 61 per cent from 75 per cent.
That jump is encouraging, but Canadian companies shouldn’t celebrate just yet. “People are reporting less cases this year, but taking a foot off the gas can lead to complacency,” said Peter McFarlane, head of Kroll’s Toronto office.
Banks, for example, have spent the past several years trying to crack down on credit card fraud, which is why so many customer have been migrated to plastic with chip technology and a password. In 2011 credit card fraud for the three major credit card companies (American Express Canada, Mastercard Canada, and Visa Canada) amounted to $437-million for Canadian-issued cards. Debit card fraud amounted to another $70-million, according to the Canadian Bankers Association. In credit and debit fraud cases, the victims are reimbursed by the financial institution that issued the card.
Maura Drew-Lytle, a spokeswoman for the CBA, says that so far criminals haven’t been able to duplicate the chips, so the cards are expected to reduce fraud by the time all merchants move over to the new system at the end of 2015. But right now, the CBA says instances of credit card fraud are on the rise.
Fraud prevention company Detica NetReveal believes fraud is still an especially persistent malady for banks and insurance companies. Joe Friscia, president of Detica’s Americas division, says that cyber fraud is likely to get worse, and much like a chess match, it can be difficult to anticipate your opponent’s next move. “Once people start harvesting data, they can use it against you to defraud you of money, or access top secret information about things like mergers and acquisitions,” he said. The U.K.-based company is adding staff to its Canadian team and relocating to a bigger Toronto office.
Similarly, the U.S. Secretary of Defense said in a recent speech in New York that a “cyber Pearl Harbor” could be on the horizon for the U.S. if enemies were to attack military systems and communication networks. Such an event, or several attacks at once, could result in deaths and “create a profound new sense of vulnerability,” Leon Panetta said.
Mr. McFarlane is less concerned. “There will be more and more threats of cyber crime,” he concedes. “But companies are also getting more successful at repelling those threats.”
With the London interbank offered rate (Libor) rigging scandal still visible in the rear-view mirror, fraud remains top of mind–especially since the majority of fraud can be traced to someone inside a company. The Kroll fraud research found that of the firms that did experience fraud, two out of three were hit by an insider. “Canadian companies were a little less inclined to use due diligence processes to screen vendors, partners or employees. If we ease up more in this area it could come back to bite us,” said McFarlane.