The impact of fraud post the GFC is apparent, and the increasing value of frauds in Australia in the latest survey period to December 2011 is probably related to the current economic uncertainty. Key findings include:
- Commercial businesses and financial institutions ranked equal first in fraud losses sustained over the 4-year period, although financial institutions experienced a higher average loss per fraud case.
- Eighty percent of frauds that were committed against commercial businesses were ‘inside jobs’ undertaken by rank-and-file employees or managers, averaging $1.8 million per fraud. The largest recorded fraud in the Barometer ($45 million) and the largest against an Australian listed company ($19 million) were both insider frauds.
- Frauds committed by management cost Australian businesses $400 million over 4 years, averaging over $2.78 million per fraud, almost triple the average for non-managers.
- Accounting fraud, which invariably involves insiders, weak controls and a lack of detection processes, remains the most common type of fraud.
- Gambling was often cited as an important motivator of fraud.
Given the fraud losses that organisations are experiencing, many organisations need to instill (or strengthen) an effective approach to fraud prevention and detection. There are several elements to such an approach:
- Undertake robust risk assessments that challenge existing internal controls with a focus on procurement, contracting, and accounting and payroll functions, including electronic banking and accounts payable vulnerabilities.
- Use data analytics to extract useful information from large volumes of data to help identify unusual trends, potential fraudulent activity and relevant behavioural characteristics.
- Provide staff with fraud awareness training. (Staff may be responsible for many frauds, but they are also an organisation’s best defence against it.)
- Make sure there is a formal plan for combating and responding to fraud. Good intentions do not deter or detect many frauds; robust controls and thorough training do. An effective plan should set down clear roles and responsibilities and should allow for confidential reporting channels through which people can raise concerns and suspicions.
The Fraud Barometer analyses incidences of fraud before the courts with an average loss over $100,000 per fraud.