One of the nastier effects of an economic crisis is a rise in white-collar crime. So, if you think swiping an office pencil or nicking a notepad is fine, think again. Petty theft may be commonplace, but companies are not only entitled to view this as fraud but are more likely to do so when times are tough. The current financial crisis points to an increase in white collar crime, according to the January 2009 issue of the 'Global Fraud Report' by risk consultancy company, Kroll. Market downturns not only traditionally reveal crimes which took place in former boom years, but provide fresh opportunities for criminals and different vulnerabilities for companies, the Kroll report said. Hand in hand with this comes a surge in full-scale fraud investigations, involving legal disputes, regulatory action and prosecution, it said. Workplace fraud happens every day in every organisation, especially in today's environment, said Kenneth Wong, partner, systems & process assurance, at PricewaterhouseCoopers (PwC). It takes many forms, from pilfering to highly complex financial false accounting. Corruption and the misuse of confidential information also come under this umbrella. 'Another type of fraud is diverting company businesses to a parallel operation,' said Susan Kendall, partner, dispute resolution department, at law firm Baker & McKenzie. Fraud also incorporates the theft or misuse of intellectual property. This can involve anything from simple infringement of copyright to the full-scale theft of ideas, designs, logos or patterns. Data theft is one crime that can go hand in hand with an economic downturn, Mr Wong said. 'When people don't feel secure, they tend to do things they wouldn't normally do.' Some individuals steal company data as surety against future difficulties. 'If they have technical information, they [believe they] can perhaps bring down the company's computer systems in the event that they get fired,' Mr Wong said. Workplace fraud can occur at any level of any organisation. Complex false accounting, for example, generally occurs high up the company ladder. 'People can do this because they are in a sufficiently senior position to overrule other colleagues or sufficiently influential to get other people on board,' Ms Kendall said. Workplace corruption is quite common in this region. Unauthorised payments, corruption and false accounting, via boosted sales figures, false commission and bribes, are par for the course. According to a global security survey conducted annually by PwC and CIO and CSO magazines, data theft is a hot topic. The survey noted that the mainland continues to improve but still needs to consider security from a strategic and management perspective Chinese respondents said that 44 per cent of their security incidents were associated with data theft, compared to 16 per cent worldwide. 'The rate of incidents happens more frequently in China as people's priority for intellectual property rights is not as rigorous as elsewhere,' Mr Wong said. This year has also seen a significant increase in reports of suspected theft and corruption within Hong Kong companies with a presence on the mainland. 'Fraud is probably the number one non-operational factor leading to business failure in our zone,' said Steve Vickers, FTI-International Risk's president and chief executive. The economic downturn is a catalyst because tight profit margins force companies to flush out fraud and corruption. 'Desperate people in difficult times sometimes do desperate things,' said John Donker, PwC's partner, forensic services. Scammers might need cash at a time when salaries have been reduced or commissions dropped. Larger scams also tend to be uncovered when companies are more introspective. When business drops off, companies tend to look at recovering what is due to them. Workplace theft can hit organisations hard. 'It can push a company to a wall, depending on the size of the fraud committed,' Ms Kendall said. 'Where a company is smaller, it can easily be pushed under. There's also a very big reputational risk.' A lot rides on organisations' security policies and culture. Companies that deal with workplace fraud most successfully have consistent policies and procedures for dealing with people who commit fraud, regardless of their level or position, Mr Donker said. Adequate security measures include security policies that set out company rules in relation to the use of property, removal of company property from the premises, bribery and corruption. Effective technology and protection measures are musts. Employees should also sign non-disclosure agreements on a regular basis, Mr Wong said. Otherwise, it is difficult to take action against employees who commit economic crimes. Whatever the crime, ultimately the buck stops with those in charge. 'It's almost impossible to eradicate [workplace fraud] completely - it would be like eradicating crime completely from life - but you can minimise the risk or be vigilant to risk and deal with incidents swiftly and responsibly,' Ms Kendall said. 'Turning a blind eye is not an option.'