Down economy leads to rise in fraud
Gambling is still the main driver of corporate fraud, KPMG fraud experts have warned.
“In the last eight years of our fraud survey gambling [has been] the number one motivation,” KPMG director of forensic advisory services Peter Morris said.
“The men favour the casino and horses while the ladies go for the poker machines,” he said.
Although KPMG hasn’t released its 2008 survey, Morris said there wasn’t a big difference in the figures from the previous year. The average amount taken by people committing fraud to fuel gambling habits was almost $300,000.
The second biggest driver of fraud was greed and attempts to improve lifestyle, with the average amount stolen being $238,000, Morris told the audience at the CPA Congress in Melbourne.
The typical male fraudster was aged 38, in a non-managerial role and had no criminal history.
“They have worked for five years in the organisation and are motivated by greed,” he said.
“It usually takes 12 months to detect their fraud using internal controls and only 36 per cent of the stolen money is recovered.”
The typical female fraudster is aged 34, has been with the organisation for four years and, again, has no history of dishonesty and is motivated by gambling.
“They are usually detected after 13 months through internal controls and 54 per cent of the money is recovered.”
Morris said incidents of fraud have doubled in the past 12 months and companies are focusing more on the issue.
“Fraud is counter-cyclical and when the economy is running bad fraud rises,” he said.
“To counter this, we are seeing audit committees becoming more involved and we are also talking more to supervisors.”
Morris said everybody in an organisation has an active role to play to counter frauds and the number of 'whistleblowers' reporting fraud is increasing.
This is often done through an anonymous phone line where details of the fraud can be reported. Morris also said companies are more often reporting fraudsters to the police so a criminal record is obtained. However, the increase in employment history fraud is also on the rise.
“People disguise the fact that they have spent some time [in jail] by saying they spent some years at home with the kids,” he said.
“They are using beaks in their careers to cover times in jail.
“Poor reference checks on a fraudster enable them to infiltrate the company and commit more crimes.”
Another way for a fraudster to get into a company is to work as a contractor initially and then be offered a full-time job. Morris said this means they can avoid employment checks, as they are not undertaken when they are a contractor.
“We are also seeing people claiming to be more qualified than they actually are,” he said.
“In this multicultural society, who knows what the original documents are supposed to look like?”
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