Finance company collapses drive fraud numbers
The value of large frauds hits new highs amid several high-profile prosecutions, and companies are warned excessive lay-offs can promote internal fraud.
The financial losses involved in large fraud prosecutions has reached new highs, according to KPMG’s latest fraud barometer.
Accountants remain the most likely people to commit fraud against businesses.
In the second half of 2011, 24 cases totalling losses of $280 million were brought before the courts, the highest value since the barometer began in 2008.
The barometer only includes frauds of more than $100,000.
Five cases were “super frauds” of greater than $3m, and two topped $100m.
Those were for prosecution of former Lane Walker Rudkin CEO Ken Anderson ($118m), and Christchurch man Gavin Bennett ($103m).
The other three relate to the collapse of Capital + Merchant Finance ($28m), Belgrade Finance ($18m), and a fraud against Dunedin-based Motor Trade Finance ($4.9m).
KPMG head of forensics Stephen Bell says frauds involving financial institutions accounted for 81% of the total value in this barometer.
“This highlights the importance of financial organisations conducting appropriate customer due diligence and loan underwriting procedures.”
Mr Bell says the value of large frauds will continue to reach new highs, being driven by cases against finance companies, such as the upcoming $1.5 billion case against South Canterbury Finance.
The barometer also shows accounting fraud was the most common type against commercial businesses, he says.
This has become more prominent since the global financial crisis, as more organisations restructure and lose staff who understand the company’s internal controls.
“They lose the checks and balances that would otherwise have been there, making fraud easier to commit,”, he told NBR Online.
“This reinforces the need for organisations to consider the strength of their controls, particularly around payroll and accounts payable.”
By Caleb Allison
Fri, 13 Apr 2012
Fri, 13 Apr 2012
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Finance company collapses drive fraud numbers
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