Increase in the cases of white-collar crime 

Looking at the amount of losses, it was investors, as in the previous year, who were the hardest hit as the victims of white-collar crime. With losses totaling CHF 117.6 million, compared with the figure for last year (CHF 130 million) there has been only a slight change. Considering, on the other hand, the number of offenses, “commercial enterprises,” with 19 cases, are at the top; while investors take third place with 11 cases.

 

For the commercial enterprises, however – despite the higher number of cases – the total losses are comparatively “lower” at CHF 66.8 million. While this denotes an average amount of losses of CHF 3.5 million for commercial enterprises, the average total loss for investors, at CHF 10.7 million, is clearly higher and well above the overall average. In nine of the 11 cases of investors being the victim of white-collar crime, the perpetrators were on trial for embezzlement, while in the other two cases it was for investment and accounting fraud.

As far as the amount of losses is concerned, the Lake Geneva region suffered the most with CHF 270.9 million. Eastern Switzerland takes second place with CHF 114.3 million, followed by Zurich with total losses of CHF 43.1 million. Looking at the number of offenses, Zurich leads with 23 cases (24 cases in the previous year), followed by the economic area of the Mittelland region with 13 cases and Eastern Switzerland (12 cases).

 

Thus Eastern Switzerland recorded both a higher number of cases of white-collar crime (+71%) and an increased amount of resulting losses (+212%). The substantial amount of losses in the Lake Geneva region, however, was caused by one individual case. Without that case the region would be in last place in terms of both sets of statistics, with losses amounting to less than CHF 1 million.

In the vast number of cases (53) a lone perpetrator was involved. The involvement of more than two perpetrators represented the exception with only three cases. Looking at the groups of perpetrators, it is striking that the professional perpetrator group caused, on the one hand, the highest total losses, at CHF 68.8 million, and, on the other, the highest average loss per crime, at CHF 13.8 million. In comparison with previous years there seems, however, to have been a change in relation to perpetrators from “management”: in the reporting year only five cases were recorded, with total losses of CHF 8.9 million, in which the perpetrators were members of the management of the company that was the victim of the crime.

 

This decline cannot yet be evaluated as a new trend, however, as Anne van Heerden, Head of Risk Consulting at KPMG Switzerland, explains: “It would be wrong to conclude that members of company management are inherently less involved in fraudulent activity. Looking back at the figures from previous years confirms this fact. Often members of the management use deficient checks or the blind trust put in them to their advantage.”

In contrast, non-management employees committed more crimes last year than the year before: in 20 cases the perpetrators could be ascribed to this employee level. They caused total losses of CHF 55.3 million. Add to that those perpetrators who fulfilled a trustee or asset management role, then these figures are increased to 33 cases with total losses of CHF 112.4 million. This means that around a half of all white-collar crimes – those crimes committed by management included – in 2011 were committed by perpetrators who were employed or had been commissioned by the victim of the crime.

 

Only in eight cases did the offenders act “in private” and, for example, embezzle funds. Here too, the total amount of losses, at CHF 4.4 million, is rather low in comparison with the in-house offenses.

In the crime statistics, embezzlement ranks clearly in first place (39 cases). Even though it was indeed only in five cases that a charge of “embezzlement of customer funds” was brought, these cases still account for 95% of the losses caused (CHF 398.4 million). The individual case previously mentioned goes a long way to explaining this. Fraud, with 29 charges, was the crime that perpetrators were second most frequently charged with, followed by money laundering (nine charges).

“The causes of the rise in the number of white-collar crimes and the total amount of losses can be traced back to the economic climate and the ongoing publicity of such cases,” explains Philippe Fleury, Head of Forensic at KPMG Switzerland, stating more precisely: “White-collar crime is always present, in both good and bad times. But it is when economic activity slows down and sales figures are on the decline that financial losses suffered as a result of a crime cannot be absorbed so easily. Also the desire for compensation tends to be greater. With regard to the perpetrators the trend can be observed that the desire to receive what ‘one is entitled to’ grows in line with the increase in dissatisfaction.” ^

 

“Moreover it is also noticeable that the awareness of compliance and of compliance-related offenses has changed,” comments Matthias Kiener, Deputy Head of Forensic at KPMG Switzerland. “The public discussion of preventive measures and political demands from home and abroad increase the sensitivity to the subject of white-collar crime. This development, combined with the tendency for corporate ethics to take on an ever greater significance, increases the probability that a crime in a company will be discovered.”

Turning to the question of what the perpetrators used the proceeds from their fraudulent activities for, the reasons most frequently given are the financing of an expensive lifestyle or compulsive gambling. More specifically, the purchase of property, furnishings, luxury cars and household appliances were cited, as well as visiting expensive restaurants and shopping in exclusive stores. However, the proceeds were also used to pay for the care of family members and to make deposits into a Swiss pillar 3a private pension fund.

White-collar crime by region/geographical distribution

 

 

White-collar crime broken down by perpetrator

 

 

White-collar crime broken down by victim

 

 

The “KPMG Forensic Fraud Barometer” is based on cases of white-collar crime with losses amounting to at least CHF 50,000 which came to trial before a Swiss criminal court or have been charged (pending a court decision) in the reporting year and which were reported in the main Swiss daily and weekly newspapers.

 

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For further information, please contact:

 

KPMG AG

Andreas Hammer

Head of Public Relations & Public Affairs

Telephone: +41 44 249 48 20

Mobile: +41 79 335 75 06

E-mail: kpmgmedia@kpmg.ch 

www.kpmg.ch