Global Economic Crime Survey - Fraud Thriving In New Zealand

source PWC Global Economic Crime Survey

Despite the hype put out about New Zealand's perceived 'freedom from fraud and corruption' the reality seems to be very different, NZ has higher rates of economic crime than its closest neighbours and is way above the world average.

The Global Economic Crime Survey, carried out annually by one of the world's largest accountancy  professional services firms PriceWaterhouseCoopers, showed that a massive 42% of organisations in NZ had suffered from fraud in the last 12 months (against a global average of 30%) and 46% of it was committed by middle and senior management. The average fraud is costing around $500,000 in each business.

PWC is one a Big Four auditor, alongside KPMG, Ernst &Young and Deloitte Touche Tohmatsu so their report will carry a lot of credence. This is the largest international survey of its kind with over 3,000 organisations taking part across 54 countries. 85 organisations from across the public and private sectors took part in the survey: From the PWC website:

• Asset misappropriation (theft) was the most common form of fraud, cited by 86% of New Zealand respondents.
  

• Financial statement fraud was cited by 36%

• Intellectual property theft at 17%.  

•  In 72% of all cases the fraud was committed by someone inside the organisation.

"(The) survey shows that economic crime continues to be a serious issue affecting New Zealand organisations with the current economic crisis increasing the pressures and incentives to commit fraud. New Zealand had the eighth highest reported level of fraud across the 54 countries that took part, with 42% of our respondents saying that they suffered from some form of economic crime in the last 12 months. The average cost of fraud in New Zealand was $491,506 with one organisation reporting that economic crime cost them in excess of $7 million in the last 12 months.

Since (the) last survey in 2007 we have noticed a significant trend in the perpetrators of fraud towards middle and senior management. When we align that trend to the fact that New Zealand organisations say that staff reductions have resulted in fewer resources deployed on internal controls and that internal audit were being asked to do more work with less staff, we believe that there is cause for concern. It is people in middle and senior management that are more able to override controls within an organisation."

"Perpetrators of fraud"
"Internal fraudsters were the main perpetrators in 72% of fraud reported by New Zealand respondents. This figure is significantly higher than Australia (33%), Asia Pacific (57%) and globally (53%). When we looked at the sector responses, the government and public sector in New Zealand had the highest rate of internal perpetrators with 89% of frauds within this sector committed internally."

In one recent case an ASB investment banker pleaded guilty to three fraud charges. He allegedly defrauded clients of $18 million over 9 years until the bank sacked him. The amount taken is greater than the $16.9 million fraud by a staff member of the Otago District Health Board which was previously New Zealand's largest proven employee theft.

So much for New Zealand topping the international index for the least corrupt country. We are shocked the both the government and public sectors are involved. We're now watching for a backlash against the report and expecting a damage limitation offensive to be launched any time now.

See also 

$1.8m contract let without tender after $500,000 gift:

"Hastings District Council has let a $1.8 million road-building contract without competitive tender after receiving a $500,000 "donation" from a company..."

(Ex) MP Taito Phillip Field found guilty of bribery and corruption

Former immigration boss Mary Anne Field "consistently breached" the requirements of public servants to manage conflicts of interest.

Former list MP Donna Awatere Huata convicted of fraud

A couple in Timaru lost $100,000 in an nvestment fund stolen by their financial adviser, who was a member of an industry watchdog.
'KPMG survey shows fraud costing NZ millions' - poor internal control remains the major factor allowing fraud to occur with 49% of respondents experiencing fraud.


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