Australia

Details

  • Service: Advisory, Risk Consulting, Forensic, Topics, Fighting Fraud
  • Type: Press release
  • Date: 31/08/2011

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Insurance and investor fraud hit new highs: KPMG research 

31 August 2011 - According to the latest KPMG Forensic Fraud Barometer, a record number of insurance fraud cases and fraud against investors have gone through the Australian courts in the first half of 2011.

 

According to the latest KPMG Forensic Fraud Barometer, a record number of insurance fraud cases and fraud against investors have gone through the Australian courts in the first half of 2011. The survey also found that investors suffered the most significant fraud losses – amounting to $32 million - unlike previous Fraud Barometers where financial institutions and commercial businesses were the biggest victims.

 

“The range of large insurance frauds, including a case where the insured faked his own death, shows that insurers remain a target when it comes to fraud,” says Gary Gill, National Head of KPMG Forensic.

 

“The survey also found an alarming rise in fraud against investors in the last 6 months and suggests that fraudsters are targeting investors. Investment schemes promising unrealistically high returns are always worrying and investors need to exercise more caution before making an investment decision or selecting a financial adviser;  the old adage still applies – if it sounds too good to be true, it probably is,” says Mr Gill.

 

KPMG’s latest Fraud Barometer, which monitors major frauds appearing before Australia’s criminal courts over a 6-month period, revealed new trends, including an increasing number of cases where internal and external parties collude to commit fraud.

 

“Collusion to commit fraud between an employee and a supplier is harder to detect because it requires overriding the control system and is designed to avoid detection. However, if an organisation has a robust fraud risk management framework in place, including specific fraud detection measures such as a whistle blowing hotline and real-time monitoring, the alarm may be raised significantly earlier,” says Mr Gill.

 

Although the total value of fraud going before Australia’s courts has fallen to $91 million from $132 million in the last six months, the average value of each fraud case remains high at $1.8 million.

 

“Given the current level of volatility in the market, it is likely that fraudsters will continue to steal as much as they can and organisations with poor internal controls are at serious risk. Early detection is key and businesses should work towards putting adequate controls in place to prevent and detect fraud,” says Mr Gill.

 

As revealed in previous KPMG Fraud Barometers, management continued to be the main perpetrator of fraud against Australian businesses, defrauding an average of $3.37 million per case compared to the average $1.51 million defrauded by non-management personnel.

 

“This comes as no surprise as senior managers are the employees who have a good understanding of internal financial controls and are often able to override them,” says Mr Gill. 

 

Recent research by KPMG International  - which analyses the profile of a fraudster – confirms this, revealing that 29 percent of fraudsters were at management level, 35 percent at senior management level while 18 percent were at board level.

 

“The fraudster at management or senior level not only has the ability to override internal financial controls but also knows how to conceal this activity, which results in much larger amounts of monies stolen over a longer time,” concluded Mr Gill.

Media enquiries

Avilyn Tan

Communications Manager

KPMG in Australia

+ 61 3 8626 0943, 0428 435 095

avilyntan@kpmg.com.au

 

 

Fraud Barometer: June 2011 readings

Fraud Barometer: June 2011 readings
KPMG's fifth Fraud Barometer shows a rise in investor and insurance fraud. It measures fraud over $100k before the Australian courts every 6 months.

Fighting fraud

Fighting Fraud
Research and insight into the economic loss of fraud, who is committing fraud, how it is done and most importantly how to fight and prevent it.