Investment scams take fraud bill to $100 Mn

Investment scams take fraud bill to $100m

By Lucy Battersby

More than $100 million has been stolen through fraud in Australia so far this year as the market crash reveals investment scams and the tough business environment highlights company fraud.

And most fraud is committed against commercial businesses by middle-aged males in management positions who have been with the company for several years, according to the national head of forensic accounting at auditing firm KPMG, Gary Gill.

‘‘Management employees tend to have a higher level of access and more trust in the organisation so can normally get away with more over a longer period than junior employees,’’ he said today.

While there were more crimes committed in Queensland this year than any other state, the most money was taken in NSW, with more than $140 million stolen since early 2008, according to the first Australian ‘‘fraud barometer’’, which analysed fraud cases involving more than $100,000 that went through the court system.

‘‘What you find in the current climate is there has probably been a lot of investment scams similar to the (Bernard) Madoff (Ponzi scheme) which have been running for some time, and with the drop in the markets you will find these frauds tend to get discovered in a down turn,’’ Mr Gill said.

Half of all investment scams originated in Queensland, according to the survey, while fraud has decreased in Victoria over the last year, with $8 million stolen between January and June 2009, compared to $31 million in the same period in 2008.

However, because the barometer examined cases as they appeared in court, the actual fraud probably occurred about six months before those periods.

Leaner economic conditions were also likely to throw a spotlight on fraudulent activity, Mr Gill said, because margins were lower, business owners were examining accounts more closely and there were fewer staff supervising accounting practices.

‘‘Two of the most common areas are on the procurement side - where people are setting up a false supplier or vendor within the company’s accounting system and then processing false invoices to generate payments which go to their own bank accounts,’’ he explained.

The other scam involves staff in the company payroll section - where they either increase their own pay or siphon off former staff’s pay to their own account.

False accounting was responsible for 56 per cent of fraud cases so far this year, 32 per cent of the money stolen.

Very little money was ever repaid because most of it went to fund gambling or addiction problems and could not be recovered, Mr Gill explained.

Commercial businesses, financial institutions and government bodies were the most common fraud victims, but more money was stolen by crime syndicates using identity fraud, money laundering, fraudulent loans and ATM skimming.

‘‘Organised crime syndicates are more active in Australia than ever, with as many cases recorded in the first half of 2009 as all of last year,’’ Mr Gill said.

Source: The Sydney Morning Herald