Member log in

Kiwi businesses report less fraud, but procurement cons affect 1 in 5, PwC says

One in three New Zealand businesses have been victims of fraudsters, according to a global survey, down from 49.5 percent in 2011, although procurement related fraud is on the rise, reflecting the rebuild of Christchurch and more companies doing business offshore.

PwC's 2014 Global Economic Crime Survey asked more than 5,000 respondents in 95 countries, including 82 kiwis, about their experience with fraud. Of New Zealand businesses surveyed 33 percent said they had been the victim of fraud.

The decline in fraud compared with the 2011 survey partly reflects increased corporate vigilance in the wake of the global financial crisis and high-profile prosecutions including pyramid scheme fraudster Bernard Madoff in New York and Wellington financier David Ross.

"You can infer the lower levels of fraud are because there are more corporate controls since the GFC when they were stripped right back," Eric Lucas, PwC forensic services partner told BusinessDesk. "There are quite reasonable levels of identifying fraud."

He said despite the apparent decline kiwis must "maintain a watchful eye" as increased technology use gave more opportunities for would-be con artists. There had been an increase in tip off procedures, with 71 percent of surveyed companies reporting they had a whistleblowing mechanism within their company.

Procurement fraud had affected 19 percent of local businesses surveyed and ranged from playing favourites with tenders, taking kickbacks from suppliers or contractors and readjusting orders.

"It goes right through the supply chain," Lucas said. "We included procurement fraud for two reasons, partly because of the Canterbury rebuild, and partly because a lot of organisations outsource parts of their business these days."

"We are seeing more cases on the procurement side of businesses with fraudulent activity," he said.

The other 'big five frauds' identified in the survey included 70 percent who had been victims of theft, 15 percent who had experienced bribery and corruption, 15 percent human resources fraud and 11 percent affected by cybercrime.

New Zealand has had a string of high-profile fraud cases in recent years. The Serious Fraud Office brought its investigations of 16 failed finance companies to a close in April last year, and is scheduled to complete the two remaining prosecutions this April. At November last year SFO said it had convicted and imprisoned 14 persons in relation to finance companies, and four people had been sentenced to home imprisonment.

The person most likely to commit fraud is a 31 to 40-year-old man who has been with the company for less than five years and is educated to a high school level or less. Of the organisations surveyed, 70 percent said fraud was committed by an employee of the company.


More by Suze Metherell

Comments and questions

One of the difficulties in measuring the extent of procurement bribery is in defining what behaviour crosses the line – especially in the private sector. In the public sector there are usually guidelines and codes of conduct. Paterson says: "It's where you draw that line and it varies from organisation to organisation in the private sector... In the public sector there is zero tolerance and taking it to prosecution is required."[10] Although fraud cases generally go to court, Paterson says there has been a lack of bribery and corruption cases before the courts, and thinks that may be because the issue has not been taken seriously. He points out that New Zealand is a party to the OECD's Anti-Bribery Convention – but an OECD review in 2010 noted we had no nominated lead agency to head the battle against corruption and bribery. (Wikipedia)

"The person most likely to commit fraud is a 31 to 40-year-old man who has been with the company for less than five years and is educated to a high school level or less."

One day the media, PwC and others will realise that the profile changes depending on who responds to the survey, the industry sector bias and the "flavour of the month" for reported and prosecuted fraud. There is no "person most likely" etc.

Judges, Priests, Doctors, Lawyers, builders, Dentists, Shop Assistants, Car dealers, Financial Advisors, Real estate agents, the employed , the unemployed, the paid, the unpaid, policemen, postmen, men and women all steal by deception. Just as their is no one typical burglar, rapist, murderer or arsonist, their is no typical fraudster.