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Russia Tops Pricewaterhouse Global Fraud Survey

MOSCOW (Reuters) -- Russia has the world's most fraudulent economy and attempts to stamp out white-collar crime have done little to stop its spread during the global financial downturn, PricewaterhouseCoopers (PwC) said in a survey.

Seventy-one percent of Russian respondents to PwC's global economic crime survey said they had been subject to economic crime in the past year, more than in next-ranked South Africa, Kenya, Canada, and Mexico.

Russian fraud was 12 percentage points above its previous showing in 2007, PwC said, and was well above the global average of 30 percent, the Central and Eastern European average of 34 percent and BRIC countries' 34 percent.

Russian President Dmitry Medvedev has repeatedly vowed to stamp out corruption since taking office last year, but such efforts have had little impact in a country where corruption is a way of life for millions.

More than half of Russian respondents to the survey, published on November 19, said anticrime measures were inefficient and that no industry in particular had been spared.

"It highlights just how much work Russia needs to do to improve its investment image," said Chris Weafer, chief strategist at Uralsib brokerage. "Not so much of a long road to walk as a steep cliff to climb."

The PwC report follows the annual publication of the Corruption Index by Transparency International, which ranked Russia, one of the world's largest economies, at 146th-most-corrupt country on a par with Kenya and Ecuador.

PwC listed South Africa as the world's second-most fraudulent country, with a 62 percent response rate to the crime question, followed by Kenya with 57 percent, Canada with 56 percent, Mexico with 51 percent, and Ukraine with 45 percent.

The percentage of Canadian firms saying they were victims of fraud rose to its highest in six years.

Economic Downturn

PwC said the global economic downturn had significantly affected most organizations, where asset misappropriation, corruption, and bribery were the most common types of fraud.

Sixty-two percent of respondents reported a decline in financial performance over the last 12 months and 40 percent of all respondents said the risk of economic crime had risen due to the recession.

The situation in Russia looks set to get worse, PwC said.

"Economic crime is and will remain a very serious risk for Russian organizations," its report said.

"The economic downturn is changing the nature and scale of the fraud and integrity risks that organizations face. The speed of change is such that opportunities to commit fraud will be prevalent.

"More people will feel real pressure to 'cross the line' or look the other way while others do so."

Japan, Hong Kong, Turkey, and the Netherlands featured as the territories that reported the lowest levels of fraud with 9.6 percent, 13 percent, 15 percent and 15 percent respectively.

PwC said over 3,000 respondents from 54 countries participated in its survey.