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Big cases of fraud sting Australian business to tune of $2 million each

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The average value of large fraud cases in Australia remains well above $2 million, despite the total value of large frauds decreasing in the last six months, according to the latest report from tax auditor and consulting firm KPMG.

The bi-annual KPMG Fraud Barometer, which monitors major frauds before Australia’s criminal courts over a six-month period, found that commercial businesses continue to be hardest hit. The majority of fraud was committed by employees, particularly managers and directors.

Gary Gill, head of KPMG Forensic, says the findings are still tracking fraud committed before and during the worst of the global financial crisis and indicate that opportunistic staff continue to be the single largest threat to organisations.

“A surge in ‘supercases’ has provided the second highest average fraud result since the inception of the KPMG Fraud Barometer,” Gill said.

The half-year findings include supercases such as a $27 million accounting fraud case in South Australia, a $15 million forgery case and a $27 million tax evasion case in Western Australia.

Gill noted that while the number of fraud cases decreased from 81 to 56, the average value of case was well over $2 million.

“As the economic crisis deepened, fraudsters began stealing more money in each case,” Gill said. “Given the current level of economic uncertainty, fraud will continue to weaken businesses with poor internal controls.”

The Fraud Barometer placed accounting fraud at the top of its list, valued at $41 million of large fraud losses.

“Long-term and often high-value frauds, as seen in these supercases, are typically committed by management-level staff,” Gill said. “They more commonly have a good understanding of internal controls, how they can be overridden, and how this can be disguised.”

Financial institutions were the most common victim of organised crime syndicates, with more than $30 million of fraud cases prosecuted over the last six months.

Other key findings:

  • Queensland continues to be the hardest hit region, recording the highest number of cases for the third time out of five Fraud Barometers. “The data suggests that this is a potentially systemic problem in Queensland, where there are more accounting frauds and investment scams coming to court compared to other states,” Gill said.
  • Western Australia and South Australia recorded their highest fraud-case values since the inception of the Fraud Barometer, due to the supercases of $27 million each in those regions.
  • New South Wales had less than five cases of fraud before the courts, its lowest number and value since the Fraud Barometer was launched.
  • The number of Victorian cases hovered below 15 for the third straight period. Its total value dropped considerably following of conclusion of the Clive Peeters case, which was largely responsible for the spike in the previous period.

“Fraudsters will seek out any weakness in a business undergoing change,” Gill said. “Businesses experiencing growth or downsizing should focus on testing the adequacy of their internal business controls to mitigate fraud risk.”

Image by Alan Cleaver

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