18 February 2013

KPMG has published its Australia and New Zealand fraud survey for the last 20 years. The findings of the latest survey suggest that there may be a reduction in the frequency of fraud but the amount involved in each incident is increasing.

The survey involves self-reporting by private and public sectors in both countries. The financial sector remains most prone to large scale fraud, but fraud against the public sector is not diminishing.

You may see someone who fits the average profile – but would you suspect someone like them is a fraudster? The KPMG survey indicates that men are three times more likely to fit the fraud offender profile than women. They are most likely to be aged between 25 and 44 – although there is an increase in the number of offenders aged over 55. Their motivation will be greed not need. In 91% of cases, there was no knowledge of previous offending. While there was a 17% drop in identified fraudsters earning less than $100,000, there was a 94% increase in offenders with income greater than $100,000. Where the fraud is by people working within the organization, 25% of offenders are non-management employees, 19% are managers, and 7% are identified as executive.

The characteristic of offending may be changing. The survey shows an increase over the last year in the extent to which there is collusion, with 29% of incidents involving at least one other person – up 6% in the year since the previous survey.

Organisations uncover fraud mainly through internal controls with employee reporting of suspicions being the second most common means.

These findings indicate that organisations must have standards reinforcing a culture where everyone rejects dishonesty. The recruitment process needs to verify that appointees are of unquestioned integrity (including a check that they have no criminal record) and are financially sound. There should be continuing promotion of organisational culture, with staff discussion of values, and managers exemplifying the behaviour expected of everyone.

Processes that provide structure to transparent and honest behaviour must well understood by all – including the full and accessible disclosure of gifts,hospitality and potential conflicts of interest.