In Singapore, Beware of Your Own Employees When It Comes to Fraud

Internal fraud constituted 75 percent of fraud among Singapore organizations this year, up from 64 percent in 2011, according to a Singapore Fraud Survey 2014 conducted by KPMG in conjunction with Singapore Management University.

The survey also found that employees formed the greatest proportion of perpetrators, jumping from 47 percent to 58 percent in this time period.

Fraud incidents reported in 2014 involving board members and senior management officers remained unchanged from 2011 at 17 percent.

More than half of fraud incidents were first detected by employees or customers, which suggests the importance of a people-focused approach to fraud risk management.

“The increase in internal fraud since 2011 suggests that while many companies in Singapore already have anti-fraud controls in place, these controls are often inadequate,” says Bob Yap, Head of Advisory at KPMG in Singapore.

Yap notes that an organisation’s board of directors plays a critical role in the oversight of programmes to mitigate the risk of fraud and misconduct.  

"The board, together with its management, is responsible for setting a moral tone and ensuring institutional support for ethical and responsible business practices at the highest levels of the organisation.”

“Promoting an anti-fraud culture and having management lead by example sends out a message that fraud will not be tolerated,” adds Professor Pang Yang Hoong, Dean, School of Accountancy at Singapore Management University.

The survey also suggests that 29 percent of the survey respondents experienced fraud incident within their organisation over the past two years, up from 22 percent in the 2011 survey.

Role of data analytics

The survey also found that one in 10 respondents said that fraud incidents were first detected by data analytics or other investigative procedures. 

“As the power and prevalence of data analytics increase, it is likely that the use of technological solutions to identify fraud will continue to grow,” says Yap.

The survey also revealed that while companies recognise the threat of fraud, they can do more to implement anti-fraud measures.

A majority or 85 percent of respondents said fraud and ethics policies were communicated to the employees, yet only 59 percent felt their employees were well informed of the risks of fraud.

Seventy-eight percent  of  respondents  said  control  measures  were  regularly  reviewed   for effectiveness,  but  only  58  percent  monitor  fraud  risk  indicators  to  pre-empt   fraudulent activity.

“Organizations should periodically monitor the effectiveness of anti-fraud policies across their organization," Yap said.

"Monitoring plans should encompass activities that are tailored to the nature and degree of the risk involved, with higher-risk issues receiving priority treatment.”

Almost all or 91 percent of respondents were concerned about the conduct of third parties, but only 41 percent communicated their fraud and ethics policies externally.

“The best time to plan is before a fraud occurs, not afterwards.  Preventive measures are designed to help reduce the risk of fraud and misconduct occurring in the first place,” Yap said.



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