Companies in Romania lose impressive amounts of money every year as a result of fraud schemes orchestrated by or with the help of their own employees. However, the phenomenon of so-called occupational fraud or internal fraud remains a taboo topic for most top managers in 2022, according to Corporate Intelligence Agency, a company specializing in intelligence and risk management services for the private sector.

Recurring international statistics show that 98% of private companies have been defrauded from within in the last two years, and according to the Corporate Intelligence Agency, at the local level, the most common fraud schemes include private corruption, theft of assets and money from company assets and large scale fraud, which is most common in companies operating warehouses or production halls.

"Occupational fraud is a phenomenon that we find everywhere and that affects absolutely all companies, regardless of their size or their field of activity, the only difference being the amount of damage suffered. Romania is no exception to this rule, but the specificity of the phenomenon at local level is due to several factors, such as a less developed organizational culture than in other countries, the lack of regular checks and the lack of control mechanisms over the activities of key employees in companies. In addition to these factors, there is also the reluctance of local management to approach occupational fraud as any other risk area, for reasons related to reputation or lack of knowledge about the prevention solutions available on the Romanian market", explains Gabriel Zgunea, CEO of Corporate Intelligence Agency. 

The situation in Romania similar to CEE countries

Although the phenomenon of fraud is certainly and without exception a global one, the situation in Romania is similar in dynamics and magnitude to other Central and Eastern European countries such as Poland, Hungary, Bulgaria, the Czech Republic, Croatia and Bulgaria.

While in Romania, private corruption accounts for around 60% of the total forms of internal fraud in a company, in Western Europe, the percentage drops to 40%, and the average loss incurred by a company as a result of internal fraud drops to 170,000 Euro per caseaccording to a report published by the Association for Certified Fraud Examiners (ACFE) for 2022.

"Private corruption is still one of the most common forms of insider fraud, and it can take the form of preferential allocation of contracts to preferred suppliers, exposing companies that face this phenomenon not only to money losses, but also to potentially heavy penalties that can be applied by the competent authorities", says Gabriel Zgunea, CEO of Corporate Intelligence Agency. 

Fraud reaches astronomical proportions in production and warehouses

As for the various fraud schemes by which goods or sums of money are stolen from companies' assets, their specificity lies in the relative simplicity of the method of theft (as opposed to the manipulation of a company's accounting, for example), coupled with the ease with which they can be repeated on a large scale, without alerting the control mechanisms put in place by the companies. These fraud schemes reach astronomical proportions when they are implemented in company warehouses or production halls,

Conflict of interest intertwined with abuse of power

"All of these fraud schemes that we see almost without exception with our clients have several elements in common. First, they involve an abuse of power by a key employee, whose activities in the company are not effectively scrutinized. This abuse often takes the form of a conflict of interest, which the company could have prevented, but failed to do so," says Gabriel Zgunea. 

According to the corporate intelligence company, organizations are encouraged to deal with fraud in a much firmer way, as the Romanian market offers solutions that are becoming more sophisticated and closer to the Western standard, for example, where all large companies work closely with specialized intelligence and risk management providers.

Companies wishing to eliminate or successfully manage occupational fraud within their organizations need a reliable partner who has both the right expertise and experience with such projects.

Fraud can be eliminated by a strategically designed prevention system

"Our services have undeniable advantages, given that we, as a company specializing in Intelligence and Risk Management services, often have legal possibilities that an employer, for example, does not have. We are talking here about concrete ways to prevent conflicts of interest that are far more effective than a simple annual declaration of conflicts of interest or the specific investigations we carry out to screen new contract partners or key employees. In addition, we work on the basis of a carefully prepared risk analysis where we analyze our clients' vulnerability to fraud in advance, with the aim of eliminating potential security breaches and fraud opportunities as much as possible", adds Gabriel Zgunea, CEO Corporate Intelligence Agency. 

Regardless of the fraud schemes that we see everywhere in Romania, the principle recommended by the company is always the same: good security is always the first step in eliminating internal fraud within private sector organizations.

Last but not least, the costs of developing and implementing such a system are substantially lower than the costs incurred by the defrauded companies - and here we are not only talking about financial losses measured, for example, by the total amount of money stolen from the company, but also reputational losses and potentially heavy penalties for companies that fail to prevent fraud.

About Corporate Intelligence Agency:

Corporate Intelligence Agency is a risk management company dedicated exclusively to the business environment, specialized in identifying potential vulnerabilities, risks or business opportunities and securing the business interests of its clients. The company offers applied intelligence solutions, competitive intelligence, specific trainings and risk management having as partners organizations and corporations in the following fields: retail, banking, investment, energy, oil & gas, FMCG, pharma, industry, telecom, technology, business law.