The New Zealand Governance Centre - Document Searchdocs.business.auckland.ac.nz/Doc/Presentation-Detecting-fraud.pdf · - Investment agent admits $580,00 fraud ... • Detective Superintendent,

P w C

The New Zealand Governance Centre -White Collar Crime and Serious Fraud Conference

July 2010

Alex TanForensic Services

PricewaterhouseCoopersJune 2010

Slide 2Fraud Partners Group meeting

Alex Tan

• Director Forensic Services PwC• Master of Arts, University of Auckland• Master of Criminology, Southern Pacific University• Investigator, Serious Fraud Office• Detective Superintendent, Royal Hong Kong Police• Certified Fraud Examiner• Board Member Transparency International (NZ)• Board Member – Australasian Chapter of the Association of

Certified Anti-Money Laundering Specialists

PricewaterhouseCoopers July 2010

Slide 3

The New Zealand Governance Centre

Detecting fraud – firstly, is there a problem in NZ?


Slide 4



• How do we detect something before we know if there is a problem?


Slide 5



• How do we detect something before we know if there is a problem?• NZ Herald headlines in February 2010

- IHC manager admits to fraud- Banker admits $18m fraud charges- Firm’s $450K lost in scam- ASB profit lost to tax and fraud- DHB fraudster escapes extra jail- Investment agent admits $580,00 fraud- Couple in spotlight as $12m vanishes- Ex mortgage manager fined over alleged fraud



2009 PwC Global Economic Crime Survey

• 5th biennial fraud survey – 2nd that is NZ specific

• 3,000 organisations across 55 countries – 85 in NZ

• Largest sectors in NZ that took part:

• Government & public sector (21.2%)

• Financial services (16.5%)

• Retail & consumer (10.6%)

• Insurance (8.2%)



2009 Global Economic Crime Survey

• Fraud is a fact of business life – 42% of organisations experienced fraud in last 12 months.

• Average loss over 12 months - $492,000

• Largest loss over 12 months – in excess of $7 million

Organisations reporting suffering actual occurences of economic crime

30%

24%

40%

42%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

% respondents who experienced economic crimes within the last 12 months

New Zealand

Australia

Asia Pacif ic

Global



Do we really have a higher incidence of fraud?

• HK Police & NZ Police statistics for year to 30 June 2009: Total crime reported – 78,661 v 442,540 (x5.6) Fraud/dishonesty – 5,014 v 13,651 (x2.7)



2009 Global Economic Crime Survey – who are the perpetrators?

Profile of internal fraudsters

7.5

17

74.5

11

35

54

0 10 20 30 40 50 60 70 80

Senior

man

agemen

t

Middle

manage

ment

Junio

r staf

f mem

bers

Inte

rnal

per

petr

ator

% reported fraud

20092007



2009 Global Economic Crime Survey – how was fraud detected?

Detection Methods

11

11

39

7

4

7

20

0

33

36

6

6

14

6

0 5 10 15 20 25 30 35 40 45

Others

By accident

Tip-off (internal, external orformal whistleblowing

mechanism)

Change of personnel/duties

Electronic, automatedsuspicious transaction

reporting systems

Risk management, includingpreventive fraud risk

management

Internal audit

% companies

20092007

Corporate controls

Corporate culture

Beyond the influence of management


Slide 11


Corruption – are we as good as we are perceived?



Bribery & corruption – what about NZ?

• According to Transparency International, NZ is perceived as the country with least corruption.

• Bribery & corruption essentially contained in sections 99 –106 of the Crimes Act

• Covers bribery of a foreign official • No specific mention of financial penalties• Private sector corruption is dealt with by the Secret

Commissions Act 1910- Maximum penalty 2 years & $1,000 fine

• Are NZ companies at risk?







• Percentage of NZX50 companies prohibit both the giving and receiving of bribes

0

10

20

30

40

50

60

70

80

New Zealand Australia UK US Europe

% o

f com

pani

es




• Inclusion of ethics aspects in NZX50 Codes of Conduct

0

10

20

30

40

50

60

70

80

90

Conflicts ofinterest

Obeying lawsand regulations

Regulating gifts Bribery Regulatesfacilitationpayments

% o

f Com

pani

es In

clud

ing

Ele

men

t


Slide 16


Some thoughts on prevention/detection


Slide 17


Fraud risk reviews – what are they?

• Often part of the internal audit programme

• High level review of an organisation’s anti-fraud & corruption regime

• Will normally benchmark against Standards Australia

• From the 2009 fraud survey:

• Increase in number of organisations undertaking FRA (7%-14%)

• 29% not undertaken a FRA in previous 12 months

• 53% only performed it once in last 12 months


Slide 18


Key elements to an effective Fraud & Corruption Control Strategy

Prevention• Senior

management commitment

• Line management accountability

• Internal control• Assessing fraud

risk• Communication &

awareness• Employment

screening• Supplier and

customer vetting

Planning• Fraud Control

Plan• Review of Fraud

Control Plan• Fraud control

resources• Internal audit

activity in control of fraud

Detection• Implementing a

fraud detection program

• Role of the external auditor

• Avenues for reporting suspected fraud

• Whistleblower / protected disclosure system

Response

• Investigation• Internal reporting

and escalation• Disciplinary

procedures• External reporting• Civil action for

recovery of losses• Review of internal

controls• Fidelity insurance

Standards Australia(AS8001-2008)

How

do

you

undertake

fraud

risk


Slide 19


What does this mean in practice?

• Set the tone at the top – ensure that management clearly communicate fraud expectations

• Have a simple fraud policy

• Put in place a whistleblower regime (be aware of limitations of PDA)

• Have a Code of Conduct (endorsed by executive, annual training)

• Raise the general awareness of fraud & corruption across your organisation

• Have a robust pre-employment screening process

• Keep a close eye on contracts and contract letting – contract register, conflicts register, gift register etc

• Map your ‘as is’ payroll & AP processes and identify weaknesses

• Identify key fraud & integrity risks –include looking at your supply chain

• Do operational & finance staff are the first line of defence. Do they receive training to help identify fraud & integrity risks?

• Conduct forensic data analytics – not only of the structured data but also consider unstructured data

• Have a response plan for when issues occur

• How do you deal with government officials both here and overseas?


Slide 20


Alex Tan




Slide 21


Alex Tan



© 2004 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers. P w C

Alex Tan(09) 355 8502

[email protected]

Thank you

Documents

The New Zealand Governance Centre - Document Searchdocs.business.auckland.ac.nz/Doc/Presentation-Detecting-fraud.pdf · - Investment agent admits $580,00 fraud ... • Detective Superintendent,