It is critical that companies start to treat fraud as a fundamental business challenge

Rick Helsby PwC

And the fraud is far more likely to be caused by theft from within a company's own workforce than from outside attackers.

Nearly two thirds of firms reported instances of embezzlement during the past two years, compared to 13% for cybercrime and 12% for money laundering.

"Fraud continues to be a major impediment to doing business for all organisations in Europe," said Rick Helsby, European head of investigations at PricewaterhouseCoopers.

Big losers

Larger companies are more prone to fraud than smaller companies because of the more complex corporate structure and because staff do not feel the same level of identity with their employers.

The average European company is seeing fraud eat into its profits by 6.7m euros while companies with more than 5,000 staff lost an average of 15.1m euros.

Fraud breakdown

63% Embezzlement 13% cybercrime 12% Money laundering

But despite the worrying figures, the recovery of fraud tends to be low.

About 20% of organisations have been able to recover more than 50% of their losses.

This is partly due to reluctance to press charges because of concerns about negative publicity or fears of a long drawn out court case.

Cyber fears

Cybercrime is the biggest fraud fear of the future, with most companies expressing concern about the growing threat from the internet.

"Cybercrime continues to evolve and grow. Very few traditional frauds have the ability to remove a company's trading ability, reveal sensitive data or destroy customer confidence overnight," said the report.

Few traditional frauds have the ability to remove a company's trading ability or destroy customer confidence overnight

PWC report

A third of all companies believe that they are at greater risk from fraud now than five years ago.

"At a time when fraud is becoming more prevalent, harder to detect, and perpetrated in new ways, it is critical that companies start to treat fraud as a fundamental business challenge," said Mr Helsby.

PricewaterhouseCoopers interviewed senior representatives of more than 3,400 companies across Europe.