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Corruption and Fraud on the Rise

News & Updates

Atkinson Vinden has assisted a number of clients in recent years with fraud-related disputes. In a couple of instances, the losses have been several million dollars.

The obsession of journalists with reporting fraud and corruption was on show recently, with media scrums an all too present fixture around Phillip Street covering the trials and tribulations of fallen stockbroker Oliver Curtis and former Labour Heavyweight ‘Fast’ Eddie Obeid.

A recent study completed by KPMG has approximated that during a 6 month period between September 2015 and March 2016, 116 Frauds occurred in Australia with an average value of $3.3 million. This compares with the previous 6 month period, whereby 91 frauds took place with an average value of $1.4 million. It has been estimated that, on average, organisations and governments lose 5% of revenue or expenditure to fraud.

The question that has to be asked is what has led to this increase in fraud and corruption, and what can be done to fix the problem? Often it appears to be linked to a single person within an organisation having unchecked discretion and powers to generate and make payments. That payments can now be made so easily online has exacerbated this problem.

The United States Securities Exchange Committee employees a ‘whistle-blower incentive program’ whereby individuals who provide information that helps procure convictions against individuals or companies engaged in large scale frauds are incentivised. Incentives in this regard are generally paid from the fines issued to fraudsters, and are often in the vicinity of 10% – 30% of the total fine. This is a significant incentive for prospective whistle-blowers. At this point, despite their increasing appetite for the prosecution of fraudsters, ASIC has refused to employ such tactics. There is hope that recent increases to regulatory funding will help in this regard, although at present, it is necessary for businesses to protect themselves.

From a business perspective, it is crucial to protect yourself against fraud, be that fraud committed by people outside of your corporation, or more commonly, from inside the employment ranks. Businesses need to implement strict checks and balances to help them protect and identify specific cases of fraud, obstructing potential fraudsters from causing too much damage to a business’s bottom line. Business owners need to realise that fraudsters can come in many shapes and sizes. A general trust of your employees does not negate the need to protect your business, rather it is general trust that see’s businesses suffer at the hands of a fraudster.

If you have concerns about potential fraud in your workplace, a good starting point is to engage a forensic accountant to review your books. Once identified, a strategic decision needs to be made as to whether the Police are called, or whether private court action should be taken first to secure the stolen funds. We can assist in taking these steps, so please call us if you have real concerns in this area.