Skip to main content

India has one of the largest fraud problems with 80% prevalence rate, says New York-based firm Kroll

By Our Representative
A top international survey, which is likely to create ripples in India’s corridors of power as well as the corporate world, has said that incidence of corporate fraud in India has taken a massive leap of 11 per cent, from 69 per cent in 2013-14 to 80 per cent in 2015-26, which is essentially the period when Prime Minister Narendra Modi has been in power.
The report, based on the survey carried out by a New York-based consulting firm Kroll, and titled “Global Fraud Report: Vulnerabilities on the Rise”, may also prove to be a major embarrassment to the Modi government’s claim that his government is “corruption free”, as it says, “India has one of the largest fraud problems of any of the countries covered in this report.”
By way of comparison, it points out, India’s 80 per cent overall prevalence of fraud is third among the countries/regions analyzed, next only to Colombia’s 83 per cent and Sub-Saharan Africa’s 84 per cent. The report says, India “has the highest national incidence of corruption (25 per cent of companies), regulatory breach (20 per cent) and IP theft (15 per cent). It also ties for the highest national level of money laundering (8 per cent).”
Saying that the “outlook for the future is also worrying”, the report states, “92 per cent of Indian respondents reported that their firms had seen exposure to fraud increase in the past year. For every fraud covered in the survey, respondents from India are more likely than average to report that their firms are highly or moderately vulnerable.”
“In particular”, the report underlines, “They have the highest proportion reporting this level of exposure to vendor or procurement fraud (77 per cent), corruption and bribery (73 per cent) and regulatory or compliance breach (67 per cent).”
Pointing that while “companies in India are willing to spend to improve their level of anti-fraud protection”, the report seeks to blame fraud mainly on “junior employees”, stating, “It appears that such funds are not being invested appropriately. For respondents that had identified the perpetrator, 59 per cent indicated that junior employees were leading players in at least one such crime.”
The report further says, “Despite these vulnerabilities and the high proportion of fraud perpetrated by insiders, only 28 per cent of companies in India invest in staff background screening and only 55 per cent invest in vendor due diligence.”
In a writeup on India’s survey, “Investing and operating in India: Getting the most out of your private equity investment” by Reshmi Khurana, managing director of Kroll’s India office, says, “By some estimates, over $500 million worth of private equity (PE) investments in India are embroiled in legal disputes”, pointing out, “Corporate governance standards in India are still evolving, especially in regards to small and mid-sized companies.”
The result, according to Khurana, is that “promoters may be following certain business practices which may not necessarily be aligned with the interests of the PE investor, such as related party transactions and diversion of funds for other businesses.” 
“While investigating fraud in portfolio companies, we see that the greatest erosion of value in a portfolio company occurs within the first 18 to 24 months of the PE fund’s making the investment”, Khurana says, adding, “Our experience suggests that fraud occurs soon after the investment.”
While conceding that “corporate governance in India is evolving in a positive way, and this is being led by a new generation of entrepreneurs”, Khurana wonders, “The question is, once these businesses grow to a particular size and scale, will these entrepreneurs and the corporate governance foundation they are establishing be able to withstand the external pressures that often accompany growth?”

Comments

TRENDING

Insider plot to kill Deendayal Upadhyay? What RSS pracharak Balraj Madhok said

By Shamsul Islam*  Balraj Madhok's died on May 2, 2016 ending an era of old guards of Hindutva politics. A senior RSS pracharak till his death was paid handsome tributes by the RSS leaders including PM Modi, himself a senior pracharak, for being a "stalwart leader of Jan Sangh. Balraj Madhok ji's ideological commitment was strong and clarity of thought immense. He was selflessly devoted to the nation and society. I had the good fortune of interacting with Balraj Madhok ji on many occasions". The RSS also issued a formal condolence message signed by the Supremo Mohan Bhagwat on behalf of all swayamsevaks, referring to his contribution of commitment to nation and society. He was a leading RSS pracharak on whom his organization relied for initiating prominent Hindutva projects. But today nobody in the RSS-BJP top hierarchy remembers/talks about Madhok as he was an insider chronicler of the immense degeneration which was spreading as an epidemic in the high echelons of th

Central pollution watchdog sees red in Union ministry labelling waste to energy green

By Chythenyen Devika Kulasekaran*  “Destructors”, “incinerators” and “waste-to-energy (WTE) incineration” all mean the same thing – indiscriminate burning of garbage! Having a history of about one and a half centuries, WTE incinerators have seen several reboots over the 19th, 20th and 21st centuries. 

First-of-its-kind? 'Eco-friendly, low cost' sewage treatment system installed in Gujarat

Counterview Desk Following the installation of the Unconventional Decentralized Multi-Stage Reactor (UDMSR) for sewage treatment, a note on what is claimed to be the  first-of-its-kind technology said, the treated sewage from this system “can be directly utilized for agricultural purposes”, even as proving to be a “saviour in the times of water crisis.”

A Hindu alternative to Valentine's Day? 'Shiv-Parvati was first love marriage in Universe'

By Rajiv Shah*   The other day, I was searching on Google a quote on Maha Shivratri which I wanted to send to someone, a confirmed Shiv Bhakt, quite close to me -- with an underlying message to act positively instead of being negative. On top of the search, I chanced upon an article in, imagine!, a Nashik Corporation site which offered me something very unusual. 

Indo-Bangla border: Farmers facing 'illegal obstacles' in harvesting, transporting yields

  Counterview Desk  In a representation to the chairperson, National Human Rights Commission, human rights defender Kirity Roy, who is secretary, Banglar Manabadhikar Suraksha Mancha (MASUM), has said that Border Security Force (BSF) personnel are creating "illegal obstacles" for farmers seeking to harvest their ripened yields and transport them to the market in village Jhaukuthi of Cooch Behar district.

'Flawed' argument: Gandhi had minimal role, naval mutinies alone led to Independence

Counterview Desk Reacting to a Counterview  story , "Rewiring history? Bose, not Gandhi, was real Father of Nation: British PM Attlee 'cited'" (January 26, 2016), an avid reader has forwarded  reaction  in the form of a  link , which carries the article "Did Atlee say Gandhi had minimal role in Independence? #FactCheck", published in the site satyagrahis.in. The satyagraha.in article seeks to debunk the view, reported in the Counterview story, taken by retired army officer GD Bakshi in his book, “Bose: An Indian Samurai”, which claims that Gandhiji had a minimal role to play in India's freedom struggle, and that it was Netaji who played the crucial role. We reproduce the satyagraha.in article here. Text: Nowadays it is said by many MK Gandhi critics that Clement Atlee made a statement in which he said Gandhi has ‘minimal’ role in India's independence and gave credit to naval mutinies and with this statement, they concluded the whole freedom struggle.

Wasteland, a colonial legacy, being used to 'give away' vast tracts to Ratnagiri refinery

By Fouziya Tehzeeb* William D’Souza, a 55-year old farmer from Kuthethur, Mangalore, was busy mixing cattle feed when we arrived at his doorsteps. Around 25 km from the bustling city of Mangalore, Kuthethur is a lush green village with thick vegetation. On the way to William’s house the idyllic view gets blocked by the flares and smoke arising from the Mangalore Refinery and Petrochemicals Limited (MRPL).

CAA disregards India's inclusive plural ethos, 'betrays' ideals of freedom struggle: PUCL

Counterview Desk    "Outraged" at the move of the Central government to implement the Citizenship Amendment Act, 2019 (CAA 2019) weeks before the election, the top rights group, People's Union for Civil Liberties (PUCL), has demanded that the law be repealed. 

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Invincible, Modi 'taller' than BJP, RSS: An opportunity for Congress beyond 2024?

By NS Venkataraman*  With the announcement of poll schedule for the 2024 parliamentary election, there is palpable excitement and expectation amongst the countrymen  about the shape of things to happen in India after the  results of the election would be announced. There is also speculation abroad about the future course of developments in India.