The KPMG Fraud Barometer, monitoring large frauds before Australian criminal courts over the 6-month period to December 2010, found that financial institutions continue to be the largest victims of fraud, having lost almost $40m to fraudsters in the period. Fraudsters also hit government organisations, investors and commercial businesses hard.
Gary Gill, National Head of KPMG Forensic, says the steady stream of fraud activity is still concerning, given the cost to organisations.
“Despite the dip in this period, the $1.7m average per case is nothing to sneeze at, requiring urgent attention from every business,” says Mr Gill.
“When times are tough, businesses work with tighter budgets and watch the bottom line more closely. But organisations should not be complacent and must continue to invest in fraud prevention and detection mechanisms to reduce the likelihood of fraud,” says Mr Gill.
Fraudulent loans, investment scams and theft of investors’ money accounted for about half of the frauds in this period.
“These losses reinforce the need for financial institutions to thoroughly vet loan applications and know their customer. For investors, the old adage still applies - if it sounds too good to be true, it probably is,” says Mr Gill.
Accounting fraud continues to be the most prevalent type of fraud committed, with a third of the 67 cases falling into this category, amounting to $11 million.
“The Fraud Barometer shows that accounting frauds most often impact commercial businesses and that these fraudsters were often trusted employees, who knew how to override internal controls and falsify records to conceal the fraud,” says Mr Gill.
Other significant findings in this Fraud Barometer include:
- The majority of frauds both by number and value (70 percent) continue to be perpetrated on the eastern seaboard (New South Wales, Queensland and Victoria).
- Almost 50 percent of large frauds coming before the courts occurred in New South Wales, totalling $60m.
- Western Australia’s booming economy seems to be driving an increased level of fraud, with $25m of large fraud cases, where the majority of victims were investors.
“Regardless of size, fraud controls will benefit your organisation’s bottom line. Businesses need to be vigilant in detecting fraud, particularly by employees. Independent whistleblower hotlines are an easy and cost effective control enabling employees to anonymously report concerns or suspicions in the workplace,” concludes Mr Gill.