|
The typical company fraudster is a trusted male executive who gets away with over 20 fraudulent acts over a period of up to five years or more, according to a major new international study by KPMG Forensic.
KPMG’s study takes a look at 360 actual company fraud cases which the forensic departments of KPMG firms in Europe, the Middle East and Africa have investigated over recent years.
What does a fraudster look like?
The patterns are similar right across geographical regions. 85 percent of fraudsters are male. The typical fraudster is aged between 36 and 55. By the time he starts enriching himself by illegal means, he has usually been employed by the company for six or more years. He typically works in the finance department and commits the fraud single-handed. In 86 percent of cases he is at management level – and in two thirds of cases he is a member of senior management. Greed and opportunity are his motivating factors.
Getting away with it for years
Worryingly for companies, the typical fraudster commits multiple offences over an extended period of time before being detected. Over half (51 percent) commit twenty or more frauds, and a third commit more than fifty. Two thirds commit frauds for between one and five years, and nearly one in ten get away with it for over six years. With the total financial loss caused per fraudster being more than 1m euros in 42 percent of cases, the financial toll on companies can be significant.
Richard Powell, partner at KPMG Forensic in the UK, said: “Companies clearly have a challenge on their hands. Over 60 percent of perpetrators are members of senior management, whose status in the company makes it easier for them to bypass internal controls and inflict greater damage on the company. Given the repeated and extended nature of most frauds, companies need to work extremely hard to detect frauds earlier, through tighter internal controls, data analytical tools, and more widely publicised fraud reporting mechanisms. Engendering the right culture is also important, to create an environment where it is less likely that fraud can take root.”
Controls and tip-offs
Weak internal controls are the most usual enabler of frauds (in 49 percent of cases). Not surprisingly therefore offences are most commonly discovered through staff ‘whistleblowing’ (in 25 percent of cases). Management reviews are the second most common vehicle for detection (21 percent).
Behind closed doors
How sensitively the affected companies react to fraud is shown by the fact that two thirds issue incomplete information or none at all about the incident. The employees, authorities and media are rarely informed for fear of loss of image. Consequently, offences only occasionally undergo criminal investigation. Mostly, independent investigations are carried out without the police or the public authorities being informed.
The financial damage inflicted by fraudsters can be severe. In many cases, the affected companies have to bear the losses themselves.
Richard Powell from KPMG commented: “Recoveries of losses from fraud can take several years to be completed. Prevention (such as introducing ethics and integrity measures at the top management level) is always a more efficient and cost-effective means.”
Amongst the cases KPMG analysed, in Europe the highest proportion occurred in the public sector (29 percent of cases), with the rest fairly evenly split amongst other sectors such as industrials, communications and financial services. In Africa meanwhile, 48 percent of cases were in the public sector, while this fell to just 15 percent in the Middle East.
www.kpmg.co.uk
•Date: 19th April 2007 • Region: World •Type: Article •Topic: Operational risk
Rate this article or make a comment - click here
|
