Significant Increase In Fraud In New Zealand Over Last Six Months

The level and value of fraud continues to increase significantly in New Zealand with $100 million dollars worth of it in the last six months, according to a press release by KPMG.

The majority of it –  $65 million dollars – was money stolen from investors.

As before, managers remain the greatest risk to a business and all sectors of the NZ economy are at risk including government departments.

You may remember it was KPMG’s forensics expert Stephen Bell who also revealed that New Zealand suffered more than $72 million dollars worth of fraud in the first six months of 2010 and even that was only the “tip of the iceberg.”

PriceWaterhouseCoopers recent Global Economic Crime survey showed that economic crime continues to be a serious issue affecting New Zealand organisations with the economic crisis increasing the pressures and incentives to commit fraud. New Zealand had the eighth highest reported level of fraud across the 54 countries that took part.

The PriceWaterhouseCoopers survey, showed that a massive 42% of organisations in NZ had suffered from fraud in the last 12 months (against a global average of 30%) and 46% of it was committed by middle and senior management. The average fraud was costing around $500,000 in each business.

Here’s the KPMG press release, grim reading if you’re planning to emigrate to New Zealand to start up a business or are thinking of investing money there. When you’ve finished it be sure to check-out our Fraud and Dishonesty facts and stats page to find out what is going on in New Zealand.

Level and value of Fraud on the increase: KPMG 28 March 2011

• $100 million defrauded in New Zealand in the last 6 months
• Number of high value cases increase – 5 cases over $ 3 million.
• Managers remain greatest risk to business
• Men accounted for 73% of the cases and 82% in value of fraud

There has been a significant increase in the value of fraud, according to the KPMG Fraud Barometer report released today.

The total amount defrauded was $ 100 million in the six months to December 2010, the first time the KPMG Fraud Barometer has recorded $100 million in a single period.

This compares with $ 72 million in the first half of 2010 making a total of $ 172 million being defrauded for the 2010 year. In 2009 there were approximately $ 100 million of large frauds in New Zealand.

KPMG New Zealand Head of Forensics Stephen Bell says, “The large jump in frauds in the second half of 2010 is mainly because of a number of large cases involving multimillion dollar frauds, including a number of cases that have been prosecuted by the Serious Fraud Office. These figures confirm that fraud is a constant and serious threat to all sectors of the New Zealand economy, including business, governments, non-profit organisations, and individuals.”

The KPMG Fraud Barometer observes that based on the continued increase in the value of frauds being prosecuted, things are not getting better.

“Businesses need to continue to be diligent in thier detection and prevention of fraud. Companies need to invest in understanding the fraud ‘hot spots’ in their business and putting in place specific measures that address those ‘hot spots’ by deterring and detecting fraud when it happens,” says Mr Bell.

For a fourth consecutive period, the KPMG barometer found that those in management tend to be more likely to commit fraud than lower level employees, and when they do commit fraud generally misappropriate far higher amounts due to their access to information, authorisation capabilities and ability to understand and override internal controls.

The largest frauds by management related to those cases where the investors were the victims – i.e., investment scams or the theft of funds under management. The value of these cases has increased noteably in the six-months to December 2010 when compared to our previous barometer results.Currently $65.3m (out of $70m total fraud by management) as opposed to $6.3m (out of $11.7m total fraud by management).

The top five types of frauds based on number for the second half of 2010 were – Accounting Fraud (7), Fraudulant loans (5), Tax fraud (3), Investor money stolen (3) and Investment scam (2).

Consistent with previous findings, frauds involving the manipulation of accounting systems continue to be the biggest single fraud threat to organisations.

“The prevelance of accounting frauds in the Barometer highlights the fact that it is vital for organisations to conduct fraud risk assessments and strenghten their internal controls,” says Mr Bell.

Top five types of fraud by value of fraud were – Investor money stolen ($ 65 million) Fraudulent loans ($ 18 million), Tax Fraud ($ 3 million), Accounting Fraud ($ 3.2 million), Identity Fraud ($ 3 million).

Conducted on a semi-annual basis, the KPMG Fraud Barometer is the first of its kind in New Zealand. It monitors the level of reported frauds coming before the criminal courts in New Zealand, and provides commentary surrounding trends, the types of perpetrators, the victims, and the types of frauds occurring. Fraudulent activity must exceed $100,000, and the individuals must at least have been charged (or sentenced), for the case to be included in the barometer.”

April Fool’s Joke?

Police minister Judith Collins announced on 1 April 2011 that fraud offences were down 26.9 percent, and that despite the “pleasing statistics” she wasn’t claiming victory over criminals. Time perhaps to stop focusing on recorded crime (with all its reporting imperfections) and start looking at the costs of crime?

Frontline police don’t believe their own statistics on the level of crime in New Zealand (2005)

“While figures released last week showed a fall in recorded crime across the country, concerned police in different districts have told the Herald they do not accurately reflect the true level of offending.

They tell of crime going unreported because people cannot be bothered or think that police do not have the time to investigate, and reveal the majority of under-reporting involves property crime such as burglary and theft from cars.

They say people without insurance – or if the value of stolen property is less than the insurance excess – simply do not bother to contact police.

And officers themselves admit they do not report thefts of their own property…” read more

You may also be interested in:

  • Government dept WINZ fails to stop staff fraud – “An internal fraud unit at Work and Income was not able to prevent 13 cases of staff theft in the past five years, involving sums totalling more than $180,000. Since 2006, a dozen employees of the Social Development Ministry have either lied to procure welfare payments or deliberately defrauded the system from within, documents disclosed to The Dominion Post under the Official Information Act show…” (April 2010)
  • All of our posts tagged Fraud

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