Companies lose $100 million to fraudsters

New Zealand companies lost almost $100 million to fraudsters, a majority of who were employees, according to the KMPG Fraud Barometer 2009.

The second half of last year witnessed an alarming rise in the value of fraud, up from $22 million during the same period in 2008, to $76 million for the period covering June and December 2009.

The survey said that 33 large frauds were brought before the New Zealand courts between June and December 2009.

The total amount for the year was much higher compared to about $70 million recorded during 2008, it said.

The survey attributed the increase in the number and value of fraud in 2009 to the economic downturn and greed and warned that the incidence may escalate this year.

The biannual Fraud Barometer aimed to monitor the level of reported frauds brought before the criminal courts in New Zealand, and comment on the types of fraud, its perpetrators and the noticeable trends.

It gauged only those involving $100,000 or more and cases in which fraudsters were charged or sentenced.

“The evidence provided suggests that fraud continues to be a large problem in New Zealand, and New Zealanders continue to experience large frauds across all sectors of the economy,” the survey said.

According to KMPG, managers employed in companies were major perpetrators of fraud as they have “better opportunities and facilities” to do so.

“They generally steal higher amounts due to their access to information, authorisation capabilities and ability to understand and override internal control,” the survey said.

The government continued to be the largest victim of large frauds.

The survey cited the Internal Revenue Department as the target for tax evasion and tax fraud and financial institutions and commercial businesses for large frauds.

“The top five types of frauds based on number for the second half of 2009 were fraudulent loans (six cases), tax evasion (6), accounting fraud (5), deception (3) and investor money stolen (2).

“Fraudulent loans accounted for the largest at $34 million, followed by investor money stolen ($ 20 million), tax evasion ($6 million), accounting fraud ($ 5 million) and creditor money stolen ($4 million),” the survey said.

Crime syndicates, which were active in the UK and Australia, spared New Zealand of their activities.

KMPG said the findings of the survey demonstrated that fraud posed a serious threat to all sectors of the country’s economy, including banks, businesses, local and central government and people in general.

“Our Fraud Barometer in the UK has taught us that many large frauds emerge during economic downturns, and this has been no exception in New Zealand during the current downturn.

“It is expected that further significant levels of fraud may continue to emerge.”

The Survey said Australia’s fraud value had doubled in the past six months to more than $217.9 million.

KMPG National Head of Forensic said fraud continued to cost significantly to the Australian economy.

“There is little sign of the epidemic subsiding in Australia,” he said.

“The global financial crisis provided ideal conditions for fraudsters looking for extra money, as well as helping to uncover hidden fraud after corporate belts were tightened.

“We saw roughly the same number of fraud cases appear in court in the second half of 2009 but, significantly, a doubling in the value of the cases.”

Mr Gill said technology was a key driver in fraud and would continue to rise.

“We will see a rising number of victims with identity fraud, ‘skimming’ of ATMs, money laundering, fraudulent loans and credit card scams.

“The eastern seaboard remains the country’s key target for fraud, with New South Wales emerging as the hardest hit State,” he said.

The survey found New South Wales and Victoria experienced frauds of higher value, compared to other Australian states.

“Queensland continues to experience a significant number of large fraud investment scam cases. Two of the largest were a Ponzi scheme costing $10.5 million and a $13 million duty evasion case involving imported tobacco,” he said.