Large frauds in NZ continue to increase 

The value of frauds in New Zealand continues to be extremely high with more frauds being detected, according to the KPMG Fraud Barometer report released today.

The total amount defrauded was $ 72 million in the six months to June 2010. This compares with $ 22 million defrauded in the first half of 2009. In total, there were approximately $ 100 million of large frauds in New Zealand in 2009.

These figures show that there has been no let up in large frauds continuing to occur and brought before the New Zealand courts. Fraud is a constant and serious threat to all sectors of the New Zealand economy, including business, governments, non-profit organisations, and individuals.

KPMG Forensics Partner, Stephen Bell says, “In light of the economic downturn, these results are not inconsistent with expectations. Businesses need to continue to be diligent in their detection and prevention of fraud.”

For a third consecutive period, the KPMG barometer found that those in management tend to be more likely to commit fraud than lower level employees, and when they do commit fraud generally misappropriate  far higher amounts due to their access to information, authorisation capabilities and ability to understand and override internal controls. For instance, when  an employee in senior management defrauds a company, the average fraud value exceeded $ 1 million, compared to an average of only $500,000 for lower level employees.

The top five types of frauds based on number for the first half of 2010 were – Accounting Fraud (11), Investment scam (4), Fraudulent loans (3), Tax fraud (3), and Deception (2).

Consistent with previous findings, frauds involving the manipulation of accounting systems continue to be the biggest single fraud threat to organisations.

“The prevelance of accounting frauds in the Barometer highlights the fact that it is vital for organisations to conduct fraud risk assessments and strenghten their internal controls,” says Mr Bell.

Top five types of fraud by value of fraud were – Fraudulent loans ($ 51 million), Accounting Fraud ($ 9 million), Investment scam ($ 7 million), False invoicing ($ 3 million) and Tax Fraud ($ 682,000).

Conducted on a semi-annual basis, the KPMG Fraud Barometer is the first of its kind in New Zealand. It monitors the level of reported frauds coming before the criminal courts in New Zealand, and provides commentary surrounding trends, the types of perpetrators, the victims, and the types of frauds occurring. Fraudulent activity must exceed $100,000, and the individuals must at least have been charged (or sentenced), for the case to be included in the barometer.

Ends

For further information please contact:

Sneha Paul, KPMG Communications, 09 363 3590 or 021 243 8997

• A copy of the report is available on request.