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. Last Updated: 07/27/2016

E&Y Says Fear of Fraud Preventing Investment

One in five companies polled by Ernst & Young has decided not to invest in Russia and other emerging markets because of fraud fears, according to a survey released by the consultancy on Thursday.

"We recognize that ambitious businesses must pursue opportunities in these exciting emerging markets, but this also carries greater risk," E&Y's David Stulb said in a written statement.

Sixty percent of survey respondents in developed countries believe that fraud is more likely to occur in their emerging-market operations than in their developed-market ones, E&Y's Global Fraud Survey found. The consultancy polled 586 executives from 19 countries, including Russia and seven other emerging markets.

Two in five polled companies have no formal anti-fraud policy -- a situation that has hardly changed since E&Y's last Global Fraud Survey was released, in 2003, the consultancy said. "Senior managers express real anxiety about bribery and corruption in their emerging-market operations, but many are still not taking the threat seriously enough," Stulb said.

Russian firms lost more than three times as much to economic crime than their counterparts in Central and Eastern Europe in 2004 and 2005, according to estimates by PricewaterhouseCoopers. On average, asset misappropriation, counterfeiting and deception carried out for personal gain cost each large Russian company $3.1 million over the two-year period.

While economic crimes remain widespread, Russian companies' definition of fraud is less stringent than that of their Western counterparts.