PREVENTING FRAUD

HAVE you or your clients ever been the victim of a fraud? Chances are the answer is probably yes.

The 2012 KPMG biennial survey of fraud, bribery and corruption in Australia and New Zealand reported that a total of $373.7 million had been stolen from the 281 respondents to that survey over the previous two years.

This was up from the $105 million when the survey commenced in 1997.The average fraud reported was $3.08 million with an 82 per cent increase in the individual frauds that exceeded $1 million. I will be very surprised if these numbers do not increase when KPMG release its 2014 survey early next year.

BDO also conducts a biannual fraud survey, however, limited to not-for-profit sectors in Australia and New Zealand. The BDO 2014 not-for-profit fraud survey reported that while the number of frauds in the sector had fallen, the average size and total quantum had increased.

Remarkably, 90 per cent of the BDO respondents thought fraud was a serious issue for the sector but only 28 per cent believed that their organisation was at risk. Was this a naivety on the part of the 28 per cent or had they done something to mitigate their risk. The answer is probably a bit of both.

Clearly both surveys indicate that fraud is a significant and increasing issue in our region.

Bearing in mind preventation is better than cure, organisations should invest in integrated frameworks to reduce the risk of fraud.

One of the best ways to reduce the risk is to align the organisation with the Australian Standard AS 8001 – 2008 Fraud and Corruption Control. Areas of weakness can be rectified by benchmarking the organisation against the Standard and adopting the recommended controls and procedures.

The Standard recommends controls and procedure in following four broad areas:

• Planning and resources
• Prevention
• Detection
• Response

Interestingly, the areas of detection and response also act as preventative measures. For example, if an organisation has a very strong policy in place to detect fraud and actively communicates this to members of the organisation, then those members will be less likely to try their hand at fraudulently taking the organisations assets.

Similarly, if it is well known that an organisation has a zero tolerance policy and the police will be involved in even the smallest of matters, then the potential perpetrator will be less likely to take the risk of being caught and prosecuted.

I have been involved with investigations in which the perpetrators of fraud have not been prosecuted and did not even lose their jobs. This is the worst message an organisation can send to its staff members.

By putting in place an active and effective fraud prevention framework such as the ones prescribed by the Australian Standard AS 8001 – 2008 Fraud and Corruption Control, you and/or your clients can potentially save unrecoverable losses that can be many multiples of the costs of instigating the framework.