Fraud: A Perspective from ‘Down Under’

By By Scott Williamson, CFE

In 1997, a senior manager of a major Australian financial services firm systematically misappropriated more than AUD$750,000 over the period of a year using forged bills of exchange. His crime was discovered when his personal assistant – and co-conspirator – reported the fraud to the company’s vice president because she could no longer live with her guilty conscience. When the vice president confronted the senior manager, he readily admitted the fraud and offered to repay the monies in full. The vice president accepted his offer – as well as his resignation – and decided not to report the matter to the authorities. Within a week, the “wayward” senior manager was working in a similar position at another financial organization.

The company’s shareholders and regulators would’ve never known about the incident if not for a leaked external auditor’s report. When asked why the company didn’t press charges against the senior manager, the vice president replied, “Well, the man is 45 years old with a family. A criminal conviction would have seen the end of him. And besides, he promised not to do it again. I took the view that it would work itself out in time.” The senior manager who “got away” has since retired to an affluent coastal suburb just north of Sydney.

Unfortunately, the vice president’s laissez-faire attitude toward fraud is fairly representative of the way white-collar criminals traditionally have been treated in Australia. Consequently, fraud has proliferated “down under.”

On average, fraud costs each household in Australia AUD$2,660 annually. It accounts for more than 69 percent of the cost of all crime, and has an estimated national price tag of AUD$13.7 billion – or 3.4 percent of our gross domestic product (GDP). Considering that Australia only spends 1.8 percent of GDP on defense, these figures are disconcerting to say the least.

Several professional organizations in Australia have also tried to put a figure on fraud. The Australian Federal Police (AFP) estimates that between AUD$3 billion and AUD$3.5 billion is lost to fraud annually. In 1997, KPMG surveyed more than 1,800 large Australian businesses, which reported a total of AUD$104 million in fraud losses from 1995 to 1997. It’s estimated by the Australian Computer Abuse Research Centre (ACARB) that “…as little as 10 percent of commercial crimes are actually reported to the police.”

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