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(photo credit: Courtesy photo)
Israeli companies need to wake up to the growing threat of fraud and data theft in open markets and begin finding ways to contain the threat, experts warned Wednesday.
"There is a lack of anti-fraud education and a lack of anti-fraud regulation and enforcement in Israel for different sectors, apart from banks, but the field is growing rapidly," said Dr. Mark Lurie, a US immigrant who, in June, moved to Israel to head the Fraud Assessment Group of PricewaterhouseCoopers - Kesselman Global Risk Management Solutions. "Fraud is inevitable and cannot be eliminated, but my challenge is to make Israeli customers understand that the earlier you detect it through proactive anti-fraud, post-fraud operations, the lower the financial and moral costs."
Lurie added that, in Israel, because of fear of publicity many companies, until recently, had a "don't find out, don't talk about it" attitude when it came to fraud since not much was done in terms of prosecution and law enforcement. Thus, Lurie said, a lot of them lost faith and many companies viewed fraud as something acceptable and just wrote down millions in losses.
Shay Zandani, CEO of Kesselman Global Risk Management Solutions added that in the wake of the Bachar reforms, when insurance companies, will be offering credit and companies are required to comply with Sarbanes-Oxley rules, Israeli companies will need to start to show accountability to their stakeholders, clients and customers.
"I am a teacher, not a seller. I want to tell people what they need to hear and not what they don't want to hear," said Lurie, who has 32 years of experience in the field dealing with the biggest corporate scandals including BCCI, Enron and Worldcom. "Each year an average company is losing up to 6 percent of its revenues to internal fraud."
Speaking at a seminar on "Designing Successful Anti-Fraud Post-Fraud Operations," Lurie likened the phenomenon of fraud to cancer. "If detected early, there were ways of containment, but many people don't go to the doctor, because they are afraid of what he could find out."
According to the survey carried out at the seminar attended by companies and banks such as Bank Hapoalim, Cellcom, Motorola, Paz and Israel Chemical Industries, 46% of the 31 questioned confirmed fraud cases in their companies over the past five years, while 48% answered that their company was operating an anti-fraud plan. 32% of the incidents were reported in the press.
In recent years, security measures such as firewalls and anti-virus software have not proven sufficient to secure corporate data. The growing uncontrolled use of portable storage devices such as iPods, USB sticks, flash drives and PDAs, has turned into an easy way to steal data and an open invitation for fraud cases.