Platforms: The new frontier of fraud in India

PwC’s Global Economic Crime and Fraud Survey 2022: India Insights

  • 92%

    of all customer frauds in India were payment (credit card and digital wallet) frauds

  • 57%

    of all fraud incidents in India were platform fraud

  • 26%

    of Indian organisations lost over USD 1 million due to platform fraud

  • 44%

    of perpetrators commit fraud for financial gain

About the survey

The second edition of PwC’s Global Economic Crime and Fraud Survey 2022: India Insights looks at the new frontier of economic crime – platform fraud, or fraud associated with social media, enterprise, e-commerce and other kinds of platforms. Largely unrecognised for years, this insidious form of fraud has become more common since the start of the pandemic, owing to the rise in remote work and growth in e-commerce, delivery applications and contactless payments. And it is evolving and growing at a worrying pace, posing a new set of challenges for Indian companies.

For the second report in this series, PwC surveyed 111 organisations across India from diverse industries such as technology, financial services, banking and capital markets, consumer products and retail, education, healthcare, hospitality and leisure, and industrial products and manufacturing.

What platform fraud looks like

What platform fraud looks like

Fraudulent access to platforms can take place across multiple entities such as social media, knowledge, media sharing, services and goods platforms. Such fraud accounted for 64% of platform fraud in India. The unfamiliar and innovative nature of platform fraud is a key reason behind a general lack of understanding among business leaders about their risk exposure to this fraud category.

Over three quarters of organisations state platform fraud resulted from a fraudulent transfer to/from a platform

 

 

NET: Fraudulent access to a platform

64%

 

 

NET: Fraudulent activity on a platform

67%

 

 

NET: Fraudulent transfers to/from a platform

89%

Platforms: An insidious fraud frontier

Platforms: An insidious fraud frontier

Our survey reveals that organisations in India are grappling with various types of platform fraud, as platforms became an integral part of the way they conduct business. Social media platforms connect us every day. Ecommerce platforms provide access to goods and services. And enterprise platforms help companies interact with customers, process transactions and move funds. On average, organisations operate five platforms in the normal course of business vis-à-vis the global average of four.


Underestimating the threat

Underestimating the threat

Newer entrants to the platform environment face an increased risk as fraud perpetrators have become more sophisticated. Our survey shows that too many business leaders, both providers and users, aren’t fully aware of their exposure to platform fraud.

Organisations often don’t view platforms as a discrete sector. For instance, a company dealing with five platforms in the normal course of business may not address the grouping as an entity with common risk considerations. Rather, they are treated as five separate vendors, each with its own threat profile.


Combating platform fraudsters

Combating platform fraudsters

Platform fraud has opened up a new frontier for fraud and economic crime. Financial gain is the most common motive in platform fraud cases – in India, 44% of perpetrators commit fraud for financial gain. Other motives listed out by organisations were brand damage (32%) and competitive advantage (21%).

Financial platforms were found to be the most vulnerable, particularly those involving fund transfers – 62% of all platform frauds took place on financial platforms. The financial impact of such frauds is just a part of the harm caused to organisations. Damage to the brand and loss of customer loyalty and trust can be far more significant.

But there is hope. With proper security and controls in place, organisations can protect themselves. An understanding of who the malefactors are, where they’re coming from, and how they’re breaching the perimeter forms the framework for mounting a proper defence. Protecting your business begins with identifying the vulnerabilities along the new frontier.

PwC’s Global Economic Crime and Fraud Survey 2022: India Insights

During the pandemic, Indian consumers and organisations were quick to adopt new platforms. Today, an average Indian company operates five platforms in the normal course of business. As a result, the incidence of platform fraud is a lot higher in India.

Puneet Garkhel, Leader, Forensic Services, PwC India

Protecting your perimeter: Identify, assess, execute

Elevate responsibility for platform risk management to a chief risk officer

Platform fraud requires executive attention and an integrated, enterprise-wide response strategy with a focus on resilience. A C-suite level executive should be responsible for risk control policy. And organisational leaders must guide the risk management programme – particularly when an emerging threat has the potential to upend the business.

Elevate responsibility for platform risk management to a chief risk officer

Stay vigilant for red flags

Risk leaders need to be proactive and design a meaningful strategy to identify, assess and execute a fraud response. Otherwise, the consequences can be devastating. This can be achieved by putting in place a monitoring programme that identifies anomalies and alerts the company. Similarly, corporations need to be aware of a spike in online activity, especially after long periods of dormancy.

Negative media coverage can also provide clues. If platforms form a significant part of your business, it’s critical to pay attention to their presence in the news. Be aware of what analysts, consumers and competitors are saying about the platforms you work with, and regularly check watchdog sites for service complaints. Social media monitoring is another important tool to keep you on top of what’s happening in the market and alert potential bad actors.

Stay vigilant for red flags

Measure, monitor, control

Your customers trust you with their personal data. Conduct a risk assessment to determine your exposure and establish protocols for gaining visibility into the platforms you work with.

Purpose-built transaction monitoring systems are necessary and an effective way to prevent and detect red flags. But depending on your exposure, knowledge of your partners’ controls is crucial – perhaps in the form of third-party audit reports.

Measure, monitor, control

Be risk aware

- Sanctions evasion
Fraudsters are increasingly circumventing sanctions in certain jurisdictions to conduct platform fraud – primarily in the financial realm. Stay informed and aware of this risk if you have potential exposure.

- Environmental, social and governance (ESG)
Under this broad umbrella encompassing environmental, social and governance issues, rising criminal threats include human trafficking and privacy invasion – by government entities, in some cases, as a cost of doing business.

Building resilience to combat platform risk

Given the rapid increase in and growing sophistication of platform fraud, this category of fraud poses a substantial risk to organisations in India. Even though Indian organisations have been undertaking measures to combat fraud for several years now, platform fraud is a dangerous and growing risk. It has emerged as the most aggressive threat of the era – particularly with the pandemic accelerating digital transformation and sparking a sea change in how we conduct financial transactions.

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Contact us

Puneet Garkhel

Puneet Garkhel

Leader, Forensic Services, PwC India

Tel: +91 98 2032 0181

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