RBA falls victim to $600,000 invoicing fraud: how to stop it happening to your business

It doesn’t matter if you’re big or small – all businesses are at risk of employee fraud and the Reserve Bank of Australia has emerged as the latest victim.

A former employee of the bank, Megha Mizerni, has pleaded guilty to one count of obtaining property by deception, defrauding the RBA of $600,000.

Mizerni is yet to be sentenced by the County Court of Victoria, according to The Australian Financial Review.

An RBA spokesperson confirmed to SmartCompany the fraud had occurred and said in a statement it is trying to recover the funds.

“The matter was immediately referred to the Australian Federal Police. An investigation was undertaken by the AFP and charges have been laid,” the RBA says.

The former employee was charged earlier this year after an RBA staff member raised concerns about Mizerni’s conduct upon leaving the RBA in February.

For an 18-month period, Mizerni swindled the money from the bank through false invoices for maintenance services.

Fraud has cost Australian business $373 million in the last two years, according to the latest KPMG Fraud Barometer, but only 15% of the 281 companies surveyed saw fraud as a key risk.

Experts suggest this figure could be a fraction of the total cost, as many frauds go unreported or undetected.

Warfield and Associates chief executive Brett Warfield told SmartCompany falsifying invoices is one of the most common ways for employees to steal from their employers.

“False invoicing can be done in three ways. It can be done by an external supplier or contractor sending in fake invoices, although this is more unlikely.

“It’s usually done in two ways, collusion between a supplier or contractor and an employee, or the other way is the employee individually creates the invoices and processes them themselves to a bank account of a family business or their own business,” he says.

The KPMG study found 91% of people convicted of fraud have no known history of fraud and 82% earn close to $100,000.

Warfield says the best way to prevent employee fraud through false invoicing is to have strong internal controls, such as segregating people’s roles and responsibilities.

“In this case, if it’s maintenance invoices it could be any type of cleaning, waste removal, improvements to property or a number of other things, so businesses need to look at who can approve purchase orders for goods or services and make sure there is someone can check the work is actually being done.

“There needs to be a separation of duties. The person who approves the orders shouldn’t be the one who then checks the work is being done, this is placing too much trust in one person,” he says.

Warfield says no matter how small or large an organisation is, if there is poor supervision of staff employers open themselves up to fraud and employees are able to sometimes steal millions of dollars.

“If the boss isn’t keeping a check on the finances of the business and there is poor supervision of staff, employees can get away with a lot of money.

“If it’s a small business, then the owner really needs to be the one keeping on top of these things. It’s important business owners keep track of the company finances themselves because they need to have an understanding of how the business is operating,” he says.

The survey found 47% of major frauds occur because of inefficient internal controls.

There is an increasing prevalence of fraud cases exceeding $1 million, as KPMG report an increase of 82% of frauds above $1 million.

Warfield says whether or not a business gets its money back depends on what the money has been spent on.

“If the person has been addicted to gambling, then most often the funds won’t be recovered. If they’re not, some of them actually put money into property and if that’s the case they will get a fair whack of it back.

“If they’re just spending it on going out and enjoying themselves, they’ll get a percentage of it back, but not all of it,” he says.

Research conducted by Warfield and Associates from 2011 found there’s a 50-50 chance of going to prison if the fraud involves less than $50,000 and when the amount increases to over $100,000 the likelihood of incarceration or a suspended sentence increases to 94%.

Warfield says there’s every chance Mizerni will do prison time, with a custodial sentence of three or four years and 12 months to two years served in prison a possibility.

In another case of an employee falsifying invoices, in 2011 a former executive of at Speciality Fashion Group pleaded guilty to 226 counts of fraud after he stole almost $17 million.