Economic crime rate rises in Canada, report says

TORONTO (Reuters) - The percentage of Canadian companies saying they were victims of fraud in the past 12 months has risen to its highest in six years, according to the findings of a report published on Thursday that suggests the trend could worsen.

Some 56 percent of companies surveyed reported falling prey to white-collar crime during the period, the 2009 PricewaterhouseCoopers' Economic Crime Survey showed. That's a 10 percentage point increase over 2003 and a 4 point increase from two years ago.

"Companies need to be aware that an economic downturn can lead good people to do bad things -- need comes to the forefront and becomes intermingled with greed and opportunity, creating the perfect storm for fraudulent activity," said Steven Henderson, the head of PwC's Canadian Investigations & Forensic Services practice.

During difficult economic times, the incentive to commit fraud increases while the focus on fraud detection, prevention and investigation generally diminishes, Henderson said.

"Since companies are more vulnerable with weakened or non-existent controls due to cost-cutting and downsizing, fraudsters see increased opportunity to commit fraud. As a result, financial fraud occurs both from within and outside organizations," he added in a statement.

Earlier this month, a Canadian judge said he is likely to sentence a man who pleaded guilty to a series of illegal insider trades to 39 months in prison and impose penalties that would leave him penniless.

A month earlier, a Quebec financier who admitted swindling more than C$100 million ($94.3 million) was sentenced to 13 years in prison by a judge who said the case highlighted the need for tighter regulatory oversight.

The PwC report, which involved responses from more than 50 companies, said the sectors that reported having suffered the most economic crime were communication, insurance, financial services, hospitality and leisure.

The report, part of a PwC's global economic crime survey, found that asset misappropriation and accounting fraud were the most common types of fraud encountered by the companies that were affected by economic crimes.

($1= $1.06 Canadian)

(Reporting by Euan Rocha; Editing by Frank McGurty)