If PricewaterhouseCoopers’ annual survey is an accurate indicator, economic or “white collar” crime in Canada is growing at a disturbing rate, and far faster than in other developed countries.
The accounting giant, which has been toting crime statistics in 26 nations for the past five years, finds that in 2009, 56 per cent of Canadian companies surveyed reported instances of fraud, a 10 per cent increase since 2003. Globally, only 30 per cent of companies reported frauds this year compared to 37 per cent in 2003.
The accounting firm’s survey focuses on the various types of fraud — asset theft, accounting offences, money laundering, bribery and corruption — that are either perpetrated on companies by their own employees (59 per cent of the cases in 2009) or by outsiders, including customers and suppliers (38 per cent of cases). The survey also makes the sobering point that economic downturns, such as the one we’re in, increase “both the motivation and opportunity to commit fraud,” just when cost-conscious companies are cutting back on resources used to assess risks and provide internal controls.
Still, this understates the problem of economic crime in Canada. What the survey doesn’t delve into, however, is our longstanding structural predisposition toward fraudulent behaviour.
Canadian generally accepted accounting principles have long drawn criticism for the generous leeway they allow public companies to creatively shape financial results. This situation will only worsen when Canada adopts the new global accounting benchmark — International Financial Reporting Standards — in 2011. Even more than the current system, IFRS will allow companies leeway to make judgment calls when presenting results.
It hardly helps that Canada stumbles along with a network of 13 provincial and territorial securities commissions, most of which are ineffective at identifying or pursuing fraud. Nor do we have effective enforcement. The RCMP’s Integrated Market Enforcement Team, the front line in investigating fraud, has perennially been under-resourced and singularly unsuccessful in winning convictions against fraudsters. And Canada’s slow moving courts are notoriously lacking in the expertise required to understand the complexities of most fraud cases, and even when they convict, the sentences are usually wrist slaps.
To be fair, some progress is in the offing. Federal Finance Minister Jim Flaherty has been resolute in campaigning for a national securities commission against the parochial objections of Alberta and Quebec in particular. And in late October, the federal government introduced legislation to amend the criminal code to provide tougher sentences and other strictures against convicted fraudsters. The bill is currently at the committee stage. Canada is taking baby steps when it should be making great strides, but some progress is better than none at all.
