19 May 2014

Procurement Fraud

Procurement fraud is one of the most widespread and pernicious forms of white-collar crime in South Africa today. PricewaterhouseCoopers (PwC) Global Economic Crime Survey for 2014 shows that it is the second-most consistently reported type of fraud in the country, accounting for 29% of economic crimes committed.

A full 69% of South African companies taking part in the survey said they had experienced economic crime within the past two years – of those, 59% reported procurement fraud, which is much higher than the global average of 29%.

Senior and middle management appear to be the main perpetrators of internal crimes within organisations. The typical fraudster tends to be male, between 31 and 40 years of age, who has worked at a company for 10 or more years and has at least one university degree. Despite this, many companies do not carry out fraud risk assessments, leaving their businesses vulnerable.

What is procurement fraud and how does it affect an organisation?

Procurement fraud is essentially any fraud that occurs within the procurement lifecycle of a product or service, including the processes of buying, selling, paying, collecting, sourcing and managing the supply chain. Types of fraud include collusion between suppliers, creating shell companies to make fraudulent payments, bid rigging or splitting and issuing invoices for products and services for non-existent suppliers. Vendor selection tends to be the most targeted step in the procurement process, though all steps are vulnerable to fraud.

Any industry can be affected, but the PwC survey indicates that the worst-affected industries in South Africa are engineering, construction, energy, utilities, mining and government or state-owned enterprises. We are one of the biggest global losers when it comes to economic fraud, recording losses of between R10 million and R1 billion. Because procurement fraud is complex and can be committed in a variety of ways, investigating it requires experience, caution and discretion. 

Private investigator Patrick de Marco has investigated instances of procurement fraud throughout South Africa, most notably in Johannesburg, Cape Town and Durban, and can assist you in detecting and prosecuting fraudsters. Adopting a zero-tolerance approach to procurement fraud is crucial as it deters tomorrow’s fraudsters today. Private investigator Patrick de Marco’s team of experts, based in Johannesburg, Cape Town and Durban, is able to assist you with your confidential investigations.

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