Financial institutions most common fraud victims

Financial institutions are the principal victims of serious fraud, with 14 out of 50 cases coming before Australian courts in the six months to June involving fraudulent loans, insurance fraud or theft by managers of financial institutions.

Serious fraud cases over the six months have involved A$91 million of losses, according to a KPMG analysis published this week.

The aggregate value of fraud cases has been falling steadily since it peaked, at $218 million, in the six months to December 2009.

But the average value of frauds, at $1.8 million, remains high.

Managers are the main perpetrators of fraud and are responsible for significantly greater losses than lower level employees.

According to KPMG: "They are often well placed to commit fraud, given their knowledge of organisational processes and internal financial controls. They can often override these controls and conceal their activities."

The targeting of financial institutions over the period of the survey is consistent with previous surveys.

Besides financial institutions, the other common victims of fraud were investors. Losses suffered by investors were usually a result of scams or misappropriation of funds by advisers.

Commercial businesses were the third most common victims. Despite the amount of attention paid to frauds committed against consumers, they ranked low in terms of the number and value of serious fraud cases in the KPMG survey.

KPMG said: "One development of concern during this period is the number of frauds involving collusion between internal and external parties."

It said such frauds are hard to detect.