Fraud falling but cyber identity theft concerns remain | KPMG | AU

KPMG survey: fraud falling but cyber, identity theft concerns remain

Fraud falling but cyber identity theft concerns remain

There was a sharp decrease in number and value of reported frauds in Australia last year, according to KPMG Forensic’s latest Fraud Barometer. But KPMG is warning against any complacency, noting that the drop may be part of the natural ebb and flow of court cycles and investigative processes.

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In the period October 2016 to September 2017, there were 155 frauds reported with a value of $482m – a significant drop from the previous year, which saw 259 frauds worth $823m.

The data showed an increasing proportion of fraud against government bodies, and increasing levels of cyber-related and identity theft risks.

Gary Gill, KPMG Forensic Partner, said: “This is the first time in several years we have seen a decline in reported fraud – and the scale is surprising. Reported frauds can and do fluctuate due to various factors, but lessons about being more vigilant and aware of fraud risks seem to have been taken on board by companies”.

“But fraud perpetrated by professional criminals is a growing problem – this was second only to business insiders. Identity theft has risen sharply and while still a relatively small proportion of the overall fraud losses, we can expect this to climb as organised criminals target this area, using technology effectively”.

“Government organisations were a primary target and saw a large increase in their proportion of fraud losses, much of it perpetrated by outside parties. Fraudulent compensation and funding claims are a growing problem – so it is encouraging to note that nearly $10m of fraudulent claims for compensation were identified during this period, most by the CTP fraud taskforce, a multi-agency task force which was set up in 2016 to “deter, detect and prosecute fraudulent claims” and NSW Police’s Strike Force Ravens.

“Many of these frauds involved CTP claims that were made over fake, staged or minor accidents. It shows that concerted effort by the authorities to target fraud can be successful. For too long in Australia, white-collar crime was seemingly not regarded as a priority and that may now be changing.“

Key findings include the following

  • Government organisations experienced the highest total value of fraud at $199.1 million.
  • Technologically sophisticated fraud (including hacking, compromising computer accounts, skimming digital data and porting mobile phones) accounted for 6 percent of all frauds and 7 percent of value ($33.8m).
  • Loss due to identity theft also saw a sharp increase to nearly $17.9m.
  • The average value of a fraud remains fairly constant at around $3.1m.
  • 60 percent of frauds committed against commercial businesses were perpetrated by ”insiders”, whereas Government and Financial Institutions were mostly targeted by external fraudsters.
  • $7m worth of cases involved money laundering charges.
  • Management level staff committed the same volume of frauds as professional criminals – each 22 percent of all cases – but the former accounted for 38 percent of total value and the latter 50 percent. General employees accounted for 26 percent of frauds but only 4 percent of the value. The number was similar to last year but much less in dollar value.
  • The most significant losses were seen as a result of embezzlement, fraudulent investment schemes and ‘boiler room’ scams – the average value of losses due to embezzlement increased this year from $6.6m to $7.6m.
  • NSW and Victoria have surged past Queensland in volume of fraud, with the southern states accounting for 78 percent of the total value, with NSW at $219m and Victoria $158m. QLD still topped the number of frauds but it fell 44 percent in number and 83 percent by value. In South Australia, the number of frauds dropped by 50 percent and the value fell by 65 percent compared to the last period.
  • 78 percent of frauds were perpetrated by a person working alone. The proportion of frauds committed by groups has increased from 18 percent to 22 percent. Men committed 66 percent of offences.
  • Although Investors represented only 10 percent of victims, their losses were almost as significant as the government ($180m). Even so, figures this year represented a drop. Investors were victims of 10 percent of the frauds and 38 percent of the loss, down from 17 percent of frauds and 44 percent of loss previously.

Some of the larger and more interesting Australian frauds included

  • A $165 million tax scheme which siphoned PAYG payments through a complex web of payroll businesses.
  • A $128 million fraud against a punting syndicate in Victoria, where the perpetrator kept funds that were provided by investors for betting on horse races.
  • A $30 million scam in which false claims enticed individuals to invest in the share market.
  • A $15.8 million false payments scam by a day care centre in Victoria.
  • A $13.5 million fraud in which an executive forged his wife’s signature in order to use the family’s home as security for another loan.
  • $3.6 million in fake paintings sold to unsuspecting purchasers.
  • A $3.2 million cold calling scam involving the sale of defective sports-betting software.
  • A $2.9 million bribe received by a Bank executive for approving a contract.

For further information

Ian Welch
Associate Director, KPMG
T: 0400 818 891
E: iwelch@kpmg.com.au

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