Australian businesses have lost $373 million to fraud: Five ways to make sure you’re not a victim

Australian businesses affected by fraud are now losing on average $3 million for every fraudulent experience, but new research from KPMG has found businesses are still lagging when it comes to addressing fraudulent behaviour as a serious issue.

That finding comes even though the latest KPMG Fraud Barometer has found there has been a three-fold increase in major fraud during the past 15 years, with $373 million lost in the last two years alone. A massive 45% of 281 companies surveyed have experienced fraud, with the finance sector the worst hit.

In a sobering statistic, the survey found there was an 82% increase in individual cases of fraud exceeding $1 million.

But despite evidence from the survey showing fraud is rising, only 15% of respondents said they see fraud as a key risk.

Gary Gill, KPMG’s national head of forensic, said in the latest report issues like fraud, bribery and corruption aren’t in the minds of senior management, saying they “continue to ignore the problem despite knowledge that fraud is on the rise”.

Many of the key findings from previous fraud surveys remain static. The average culprit is a management type, usually male and in his 30s. Fraudsters have usually been with the company in question for a long period of time, 91% have no known history of fraud, while 82% earn close to $100,000.

But there is a growing amount of collaborative fraud, with females more likely to work together. The survey shows an increase from 23% to 29% of internal fraud instances involving collusion.

“Collusive fraud is fast becoming a significant problem for many organisations, particularly where collusion takes place between employees and external parties, as collusion protracts time taken to detect the fraud.”

“The survey shows it takes an average of 665 days before fraud is detected when collusive behaviour is in play…collusive behaviour empowers the fraudsters,” he said.

Gill also said the total figure of $373 million is of “particular concern”, and says he thinks it’s only a fraction of the total figure “as many incidences of fraud go undetected or unreported”.

The survey found 43% of firms experienced fraud, but 47% of major frauds occurred because there were inefficient internal controls.

The amount of fraud differed based on the size of the companies involved, but 9% of businesses with fewer than 100 employees said they experienced fraud, as opposed to the highest figure, 56% of businesses with between 1,000 and 10,000 employees.

Some of the more popular methods included false invoicing, theft of cash and fraudulent tendering. But the survey also found technology is playing a bigger part in fraud cases.

“Increased connectivity and social media proliferation has made organisations more susceptible than ever to cyber-attacks,” he said.

“Organisations must be as sophisticated in their cyber security as the hackers are in their methods. Cyber security must be a top priority in all risk management strategies.”

It can get complicated when protecting your company from fraud. Here are five ways to beef up your security:

Set up a tip line

KPMG has found organisations which set up an anonymous tip line for fraud investigations tend to catch culprits. Consider setting up a similar line in your office – there are companies offer these types of services from outside the office.

Keep login details to one person

If you have people who do your books or finances in-house with login credentials, then make sure you have a record of whoever has their user name and password. If something goes missing, you’ll know where to go.

Electronic monitoring

You probably don’t want to be monitoring every single email, but it can be a good idea to set up cameras in an area where fraud may be tempting.

Security, security, security

Keep your staff changing their login details at least every 90 days. That way you’ll be more likely to detect when and where fraud has taken place.

Frequent audits

There have been cases of fraud where a bookkeeper gets too cosy with a company’s finances. Get a third-party audit every once in a while to make sure everything’s up to scratch.