A fraud examiner does not believe there has been a dramatic increase in frequency of the crime but says recent high dollar value cases have skewed the figures.
Figures released today show 2010 is set to be a record year for fraud in New Zealand, with $72 million involved in fraudulent activities.
The figure is almost three times as much as the same time last year.
But Barry Jordan, a recovery and forensics partner at accounting and consulting firm Deloitte, says the current statistics are consistent with what happened after the '87 crash and the frauds were probably carried out up to three years ago.
Jordan told TVNZ News at 8 that offenders have probably spent the last six months trying to conceal their activities. He says New Zealand fraudsters broadly fit into two categories - the frustrated accounts clerk and the dominant chief executive who has the opportunity.
And he says often colleagues have no idea until later on. Jordan says people rationalise their actions and the hardest time for them is after they carry out their first fraud. That is the time to catch them, he says, when they are" sweating big time" at the very beginning when they are most vulnerable.
Jordan says internal controls are a key to stopping fraud, along with zero tolerance if a person is caught stealing and pre-employment screening.
"Criminal checks and credit checks are really, really important and the lowest cost option people can do to cut down their risk."
Tip of the iceberg
KPMG forensics partner Stephen Bell believes the latest figures are just the tip of the iceberg in terms of the amount of reported frauds in New Zealand.
"Rightfully or wrongfully, business has been long conducted based on trust and a handshake and I think that's where they're vulnerable,".
Bell told TV ONE's Breakfast programme that it's a very serious matter and comes as a result of companies taking their "eye off the internal ball".
"What we have seen is, due to cutbacks, as a result of the recession, we're finding that internal controls have been slacking and that there's been less segregation of duty."
He says managers and boards of directors need to refocus their attention on those sorts of issues.
Experts say fraud can carry on for far too long and is often discovered by accident.
"You arrive early, you work late, you seem like the perfect employee but when you go on a break someone steps in and that's when the fraud can be discovered," said investigator Danny Toresen.
Toresen wants employers to be able to detect shady employees early on.
"For example - an employee gets paid into a bank account and does that bank account feature in any payments to creditors? If it's the same then it's something to look at," he said.
With a small business the best way to avoid fraud is to stay as involved as possible.
Statistically, the most common way of finding out about fraud is via a tip-off. Now companies can turn to an external service like Report It Now - an anonymous fraud hotline. There is also data matching software used by large companies and most local councils.
The $72 million known to have been taken in frauds over the six months to June compared with $22 million defrauded in the first half of 2009. Large frauds average more than $2 million each.
About $100 million worth of large fraud was detected in New Zealand in 2009.
"There has been no let-up in large frauds continuing to occur," Bell said.
"Fraud is a constant and serious threat to all sectors."
He says identifying people comes down to having a segregation of duties, which he says is harder for companies with a small staff
"They don't have the resource in place to set up those checks and balances."
Management risk
The report said people in management tended to be more likely to commit fraud than lower level employees, and when they did commit fraud they generally misappropriated far higher amounts due to their access to information, authorisation and ability to understand and override internal controls.
"When an employee in senior management defrauds a company, the average fraud value exceeded $1 million, compared to an average of only $500,000 for lower level employees," Bell said.
Manipulation of accounting systems continued to be the biggest single fraud threat to organisations, with 11 known cases in the first half of 2010. Other types included investment scams (4), fraudulent loans (3), tax frauds (3), and plain deception (2).
But when ranked by value, the top five were: fraudulent loans ($51m), accounting fraud ($9m), investment scam ($7m), false invoicing ($3 million) and tax fraud ($682,000).
The report monitors reported frauds of more than $100,000 coming before the criminal courts, as well as the types of perpetrators, victims, and scams involved.
High profile frauds before the courts in the first half of the year included:
- A Bay of Plenty company director jailed for four years jail for tax evasion of more than $700,000, after he hired 39 sub-contractors as "invoice writers", to supply him with false documents to falsify GST returns.
- A financial controller for an Auckland company stole $2.7 million from her employer over six years to spend as a VIP high-roller at Auckland's SkyCity Casino, and her accountant partner admitted laundering stolen money through bank accounts.
- A Wellington finance and administration manager who plundered more than $2 million from her employer was jailed for four years, two months after making hundreds of unauthorised transactions from the accounts of an information technology company.
- Bank conman Stephen Versalko, 51, was sent to jail for six years' after stealing $17.8m from 30 ASB Bank customers - he spent $3.35m of his employer's money on two prostitutes.
- A former fundraising manager for the IHC created 74 invoices from three bogus companies, making $590,000 from her fraudulent activities and was jailed for three years
Figures released today show 2010 is set to be a record year for fraud in New Zealand, with $72 million involved in fraudulent activities.
The figure is almost three times as much as the same time last year.
But Barry Jordan, a recovery and forensics partner at accounting and consulting firm Deloitte, says the current statistics are consistent with what happened after the '87 crash and the frauds were probably carried out up to three years ago.
Jordan told TVNZ News at 8 that offenders have probably spent the last six months trying to conceal their activities. He says New Zealand fraudsters broadly fit into two categories - the frustrated accounts clerk and the dominant chief executive who has the opportunity.
And he says often colleagues have no idea until later on. Jordan says people rationalise their actions and the hardest time for them is after they carry out their first fraud. That is the time to catch them, he says, when they are" sweating big time" at the very beginning when they are most vulnerable.
Jordan says internal controls are a key to stopping fraud, along with zero tolerance if a person is caught stealing and pre-employment screening.
"Criminal checks and credit checks are really, really important and the lowest cost option people can do to cut down their risk."
Tip of the iceberg
KPMG forensics partner Stephen Bell believes the latest figures are just the tip of the iceberg in terms of the amount of reported frauds in New Zealand.
"Rightfully or wrongfully, business has been long conducted based on trust and a handshake and I think that's where they're vulnerable,".
Bell told TV ONE's Breakfast programme that it's a very serious matter and comes as a result of companies taking their "eye off the internal ball".
"What we have seen is, due to cutbacks, as a result of the recession, we're finding that internal controls have been slacking and that there's been less segregation of duty."
He says managers and boards of directors need to refocus their attention on those sorts of issues.
Experts say fraud can carry on for far too long and is often discovered by accident.
"You arrive early, you work late, you seem like the perfect employee but when you go on a break someone steps in and that's when the fraud can be discovered," said investigator Danny Toresen.
Toresen wants employers to be able to detect shady employees early on.
"For example - an employee gets paid into a bank account and does that bank account feature in any payments to creditors? If it's the same then it's something to look at," he said.
With a small business the best way to avoid fraud is to stay as involved as possible.
Statistically, the most common way of finding out about fraud is via a tip-off. Now companies can turn to an external service like Report It Now - an anonymous fraud hotline. There is also data matching software used by large companies and most local councils.
The $72 million known to have been taken in frauds over the six months to June compared with $22 million defrauded in the first half of 2009. Large frauds average more than $2 million each.
About $100 million worth of large fraud was detected in New Zealand in 2009.
"There has been no let-up in large frauds continuing to occur," Bell said.
"Fraud is a constant and serious threat to all sectors."
He says identifying people comes down to having a segregation of duties, which he says is harder for companies with a small staff
"They don't have the resource in place to set up those checks and balances."
Management risk
The report said people in management tended to be more likely to commit fraud than lower level employees, and when they did commit fraud they generally misappropriated far higher amounts due to their access to information, authorisation and ability to understand and override internal controls.
"When an employee in senior management defrauds a company, the average fraud value exceeded $1 million, compared to an average of only $500,000 for lower level employees," Bell said.
Manipulation of accounting systems continued to be the biggest single fraud threat to organisations, with 11 known cases in the first half of 2010. Other types included investment scams (4), fraudulent loans (3), tax frauds (3), and plain deception (2).
But when ranked by value, the top five were: fraudulent loans ($51m), accounting fraud ($9m), investment scam ($7m), false invoicing ($3 million) and tax fraud ($682,000).
The report monitors reported frauds of more than $100,000 coming before the criminal courts, as well as the types of perpetrators, victims, and scams involved.
High profile frauds before the courts in the first half of the year included:
- A Bay of Plenty company director jailed for four years jail for tax evasion of more than $700,000, after he hired 39 sub-contractors as "invoice writers", to supply him with false documents to falsify GST returns.
- A financial controller for an Auckland company stole $2.7 million from her employer over six years to spend as a VIP high-roller at Auckland's SkyCity Casino, and her accountant partner admitted laundering stolen money through bank accounts.
- A Wellington finance and administration manager who plundered more than $2 million from her employer was jailed for four years, two months after making hundreds of unauthorised transactions from the accounts of an information technology company.
- Bank conman Stephen Versalko, 51, was sent to jail for six years' after stealing $17.8m from 30 ASB Bank customers - he spent $3.35m of his employer's money on two prostitutes.
- A former fundraising manager for the IHC created 74 invoices from three bogus companies, making $590,000 from her fraudulent activities and was jailed for three years
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