Who are the fraudsters?

It’s easy to assume that perpetrators of corporate fraud are strangers. However, fraudsters aren’t necessarily who you think they are. According to PwC’s 2018 Global Economic Crime & Fraud Survey: Australian Report, more than half of all economic crime in Australia is committed by a ‘frenemy’ - someone who does business with the organisation on a regular basis, such as an employee, customer or supplier.

According to a KPMG report titled ‘Global profiles of the fraudster’, based on a survey of 750 fraudsters worldwide, perpetrators of fraud tend to be males aged 36-55 who have worked with the organisation for more than six years. They tend to hold executive positions in operations, finance or general management. Fraud is almost twice as likely to be perpetrated in groups as in solitude, with 62% of fraudsters colluding. In the survey, 65% of fraudsters were employees and a further 21% were former employees.

Getting around controls

As fraudsters often occupy powerful positions, they are more likely to get around their organisation’s internal controls. According to KPMG, weak internal controls were a factor for 61% of fraudsters. In some cases, colleagues of fraudsters unintentionally facilitated the crime without knowing it, by following orders or ‘helping out’ in a way that circumvented the internal controls. While many organisations have controls in place to detect and prevent fraud, they are not always followed by employees.

How to reduce your risk

It’s clear that to reduce the risk of corporate fraud, organisations need robust internal controls that look both inside and outside the organisation. We suggest starting with a comprehensive background screening of all new and existing employees, as well as key customers and suppliers. You may also like to conduct a risk assessment, to identify gaps in your organisation that fraudsters may leverage to commit economic crimes.

While regulators have ramped up their enforcement of anti-money laundering (AML) and counter-terrorism funding (CTF) legislation in Australia, PwC found that only 59% of organisations surveyed had completed a risk assessment and more than 40% had not assessed the risk of fraud in the last two years. Weak internal controls leave organisations at risk of fraud, as well as the risk of hefty fines for non-compliance with AML/CTF regulations.

Knowing your employees

You may not be able to eliminate the risk of fraud completely, but knowing your employees and business partners can help you manage this risk.

Our fit2work platform allows you to complete background screening at regular intervals, with more than 70 checks that cover a range of sectors. When compared to the costs and impact of fraud, background screening is an affordable offering that should be a priority for any organisation looking to improve internal controls. Contact us for more information, or visit fit2work.

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