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Call to Arms for NZ business frauds

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« on: December 04, 2011, 10:11:58 am »

Call to arms on fraud for NZ businesses
ROB STOCK
Last updated 05:00 04/12/2011

New Zealand businesses have been told they should have no tolerance for fraud and should actively try to detect it within their organisations.

PricewaterhouseCoopers partner Eric Lucas said too often serial fraudsters were able to carry out further frauds, usually at another employer, despite having been caught once or twice before.

Survey results released last week show half of Kiwi businesses have been victims of fraud in the past year, prompting PWC to advocate a "zero tolerance" stance.

The survey found that 17 per cent of employees caught are not dismissed and in a third of cases the police are not called.

Twenty-one per cent of those caught received a warning and kept their jobs while in 79 per cent of cases civil action was not taken to get stolen funds back.

Factors such as fear of reputational damage and a dip in staff morale led many companies to limit their action against detected fraudsters, Lucas said.

Companies also took pragmatic decisions when they detected fraud, Lucas said. Complaints to the police can go nowhere as their focus is on other forms of crime, such as violence. Similarly, seeking justice through civil action to recover funds is costly, time-consuming and diverts resources away from growing the business.

Often funds stolen had been frittered away, said Lucas, particularly in the cases of theft to fuel a gambling habit, or as has happened in the high-profile case of ASB's Stephen Versalko, to pay prostitutes.

In such cases, the best a company can hope for is to make an example of a thief by ultimately backrupting him or her.

As worrying for businesses is the finding by PWC that fraud is so common that more often than not a large or medium company deciding to look for fraud finds it.

But that proactive detection of fraud is not on the agenda of many firms, illustrated in part by little fraud being detected other than by accident or tip-off.

Four in 10 cases are detected as a result of whistleblowers. A third are detected accidentally.

Lucas said the vast majority of New Zealand firms had no structures in place to deal with tip-offs by employees, and there is a notable absence of whistleblower hotlines run by companies for employees, suppliers and customers (all three groups are major sources of tips) compared with similar-sized operations in other countries.

Lucas said Kiwi firms appeared to think such hotlines would be seen as "too much like Big Brother".

"It is such an obvious thing to do and companies do have to rely on tip-offs to uncover frauds to a large extent," Lucas said.

 Sunday Star Times

http://www.stuff.co.nz/business/6081859/Call-to-arms-on-fraud-for-NZ-businesses

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