Finance Staff Among Typical Fraudsters

A new report reveals fraudsters are predominantly employees colluding with others inside and outside their organisation.


The typical fraudster is between 36 and 45 years of age, employed by the victim organisation and they were in executive, finance, operations or sales and marketing functions.


More than 40 percent of fraudsters who prey on their own companies have been with the company for more than six years. In 70 percent of frauds, the perpetrator colluded with others.


This is according to Global Profiles of the Fraudster, the latest KPMG study on fraudsters. The report analysed 596 fraudsters involved in white-collar crimes committed in 78 countries including Singapore.


“These survey results confirm that the most dangerous fraudsters are those in positions of authority, with experience of their organisation and the ability to co-opt others into their schemes," says Owen Hawkes, a Partner in the Forensic Division of KPMG in Singapore.


“It is no surprise that finance and operations staff, with their control of the assets of a company, are in a prime position to divert company assets. However, staff in sales and marketing pose a much higher risk for frauds such as falsifying revenue and dishonest expense claims.”


Interestingly, for about 36 percent of fraudsters, a sense of their superiority was a contributing factor to their behaviour.


The most prevalent fraud was misappropriation of assets (56 percent), of which embezzlement comprised 40 percent and procurement fraud made up 27 percent.


About 16 percent of the reported frauds had a total value exceeding US$5,000,000. Some 18 percent had a total value between US$50,000 and US$200,000.


The Asia Pacific Fraudster
Fraudsters in the Asia-Pacific (ASPAC) region reflect the global characteristics identified. In particular, about 40 percent of the 92 ASPAC perpetuators held executive and managerial positions, and about 26 percent had been with their organisation for more than six years. About 63 percent were employees of the victim organisation.


“Most perpetrators are opportunistic,” says Hawkes. “They did not join an organisation to commit fraud, but the combination of opportunity and personal circumstances may result in them doing so. Being familiar with the processes and controls in their workplace, they used that knowledge to their advantage to defraud their employer.


He adds that the opportunistic fraudster is typically a first-time offender whose alleged behavior usually comes as a surprise to others.


“Less common are ‘predatory employees’, who actively seek out an opening and set out to deliberately defraud their organisation,” he says.


In Singapore, about 70 percent of the fraudsters analysed were employed by the victim company and they tend to be opportunists.


The report also highlighted that many Singapore companies have fewer fraud deterrence measures in place and are especially vulnerable to procurement fraud. A tendency to focus almost exclusively on price over other factors such as track record and the results of vendor due diligence can leave companies vulnerable.


Fraudsters adapt to the rapid changes in the business world
Fraudsters adapt to changes in the business environment, notes Hawkes. He says: “Fraud is like the flu. You can fix today’s strain, but it continually adapts and will be back.”


One major change is the growing use of technology by fraudsters. New generations of fraudsters use technology and access information that was not available in the past. These have resulted in a new era for the techniques of committing fraud.


Using bank fraud as an example to illustrate how methods change over time, Hawkes says: “Two decades ago, illicitly taking money from a bank was usually accomplished by a closely knit gang, perhaps using forged documents or even using straightforward violence. Now, robbing a bank has been transformed by developments such as internet banking or online forums where fraudsters trade bank account data, and a rapidly growing population of technology users with a poor understanding of the threats in the online world.”


Cyber attacks and high tech fraud will become increasingly common. The recent cyber attacks on Singapore Government websites is a case in point.


Hawkes says: “Likewise, companies here are also vulnerable to cyber attacks and fraud. Some companies in Singapore have not significantly updated their defenses in some time. What worked a few years ago will no longer be enough to keep company assets and data safe.”


On the flip side, technology also provides new opportunities for the organisation to defend itself.


“Newer approaches like data analytics and data mining can give the company a much better chance of catching the fraudster,” he said


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