Most business fraud committed by managers, KPMG warns

The majority of fraud cases in Australia are committed by management staff who divert company funds into their own bank accounts, according to new results from the KMPG ‘Fraud Barometer’.

The survey, which tracks major fraud cases worth over $100,000 in Australian courts, revealed that commercial businesses are the most common victims, with management employees the most successful in committing fraud.

The value of major fraud cases in Australia exceeded $100 million during the first six months of 2009, the survey reveals, while investors have lost over $20 million over the past 18 months in various scams.

About 83% of fraud cases, accounting for 91% in value, occurred in QLD, NSW or VIC, with QLD recording the highest number of large fraud cases and half of all investment scams.

KPMG national head of forensic Gary Gill says the numbers are significant, as he suggests only about 50% to 60% of frauds are reported, and only a fraction of those end up in court.

Gill suggests that as most fraud is committed by employees, businesses need to put hard policies in place for identifying and preventing fraud within their own operations.

“With the global financial crisis still having an impact, controls on fraud prevention tend to weaken because organisations cut back on staff. When they do that, the people who used to use those controls are gone, and so when people are put under financial strain there’s more risk of fraud occurring anyway. Businesses need to be aware of this problem.”

Gill says businesses must put safeguards within their businesses, including a review of employment history for any new workers joining the company.

“When you take on a new employee, make sure you screen them properly, and make sure you know what they have done in previous jobs because people who commit fraud usually have a history.”

“Additionally, the other thing is to make sure controls are in place for actually preventing fraud. Have controls there if people have concerns, so they know who to talk to. Clear policies for whistle-blowing will stop a lot of these events occurring early.”