Majority of travel companies ‘hit by fraud’

Four out of five travel companies have suffered from corporate fraud in the past three years.

And seven out of ten (70%) travel companies felt their exposure to fraud had increased over the past three years, with an average loss of $1.1 million per company during that period, according to a survey published by risk consulting company Kroll.

Although the costs are still small, the prevalence of certain types of risk are “alarmingly high” in the travel industry with 42% suffering from theft of physical assets or stock, management conflict of interest (30%), internal financial fraud or theft (27%), corruption and bribery (24%) and vendor, supplier or procurement fraud (21%).

New technologies, new investors and expansion into new overseas markets have opened the door to different forms of fraud, according to Kroll’s Global Fraud Report which highlights the extent and nature of fraud today across a number of sectors and the strategies to fight it.

The report draws on a survey by the Economist Intelligence Unit of 900 senior executives worldwide.

It reveals that in the travel, leisure and transportation sector:

*Overall, the travel and leisure industry suffers comparatively few problems from corporate fraud

*The loss per firm during the past three years was $1.1m, or one sixth of the average, although this is partly due to the lower turnover per firm in the sector which equates to 80 per cent of the average

*Overall, fraud has grown slightly less prevalent for the sector during the past three years, with just over one fifth (22%) reporting an increase

*Only 13% of companies claim they are at risk to the most common worries of information theft and internal financial fraud

*The current use of anti-fraud strategies is low with only one in five (20%) travel companies making use of financial controls against threats and 30% eschewing IT countermeasures or security systems for physical assets

*Although the problem of corporate fraud is not currently as serious as that faced by other sectors, the travel industry must take greater care to ensure that it does not become more prevalent.

Jules Kroll, founder of the company, said: “As our society has become more reliant on information technology, increased globalisation and greater interconnectedness, certain exposures have expanded right along with them.

“Dramatically new exposures such as ID theft, various IT crimes, and false reporting by asset managers were rarely seen 25 years ago.”

“The risks of fraud for business are greater today than in the past,” said Andres Antonius, president of Kroll’s Consulting Services Group. “Even the whiff of a fraud may sometimes be sufficient to place a company under severe scrutiny or in financial distress.”

by Phil Davies

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