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The KPMG Fraud Barometer summarises reported frauds in New Zealand for the 12-month period 1 August 2022 - 31 July 2023 and is prepared by the KPMG Forensic team.
This fifth annual edition continues the trend seen in recent years of company owners and management being the most common category of perpetrators by volume, with advisers (lawyer, accountant, bookkeeper) and employees following closely behind. Excluding a large $8.7 million fraud by property investors, business owners also continued to be the most common category of perpetrators by value. This continues the trend seen in the last two Fraud Barometers and, in our experience, these frauds are most often linked to weaknesses in internal controls.
Key Insights
- 3 Super frauds: The total number of frauds reported over $100,000 remained steady, within one of the number reported in the prior year, although the number of ‘super frauds’ – over $1 million – has reduced to three, down from seven last year, but consistent with 2021.
- $8.7 million fraud: The largest single fraud reported this year related to fraudulent home loans obtained by property investors between 2015 and 2016. This formed part of the total value of large fraud in this edition. Overall, the value of large fraud cases at $21.6 million, was a significant reduction from $105.8 million in the prior year. Although it is worth noting that the previous result incorporated a single fraud valued at $80 million. Ignoring this outlier, in aggregate, fraud value has remained reasonably steady year on year.
- Government sector: Consistent with recent years, this year’s Barometer sees the government sector suffering the highest number and value of frauds. A large proportion, around 60% of the cases in this year’s Barometer, were committed against Inland Revenue. We’re starting to see cases relating to defrauding of the Covid-19 Small Business Cashflow Scheme being prosecuted but to date these have been valued at less than the $100,000 threshold to be included in the Barometer.
Fraud trend deep dives
Financial losses due to cybercrime rose by two-thirds in the first quarter of the year, figures from cyber security watchdog Computer Emergency Response Team (CERT NZ) show.
Nearly 2000 incidents of cybercrime were reported to the agency between January and March, up 12% on the previous three months.
The regulators have already been carefully scrutinising greenwashing claims, putting in place a variety of legal frameworks and guidelines to make ESG claims more transparent and accessible, and to clamp down on misleading and deceptive ESG claims. Investigations, enforcement actions and complaints in this area are likely to be on the rise in 2023 and beyond.
Occupational fraud is very likely the most costly and most common form of financial crime in the world.
The term occupational fraud refers to frauds that are committed by individuals against the organisations that employ them.
70% of victim organisations had hotlines. A mechanism to report fraud or other violations, whether managed internally or by an external party. This might include telephone hotlines, dedicated email addresses, web-based platforms, and other mechanisms established to facilitate fraud reporting.
AI is being used in a variety of industries, including finance, healthcare and retail. It is also being used to create new forms of fraud, which are becoming more sophisticated and difficult to detect.
Our Forensic team here at KPMG can offer support with the detection, prevention, and response to fraud risks in several ways:
As in previous editions, the key findings from the Barometer emphasise the need for all organisations, of whatever size, to consider their fraud risk management framework and the internal controls that they have in place to detect and prevent fraud.
Our Forensic team here at KPMG can offer support with the detection, prevention, and response to fraud risks in several ways:
- performing a fraud maturity assessment of your organisation’s current policies and practices against best practice standards,
- conducting a fraud risk assessment to understand, prioritise and address potential vulnerabilities,
- providing a confidential whistleblowing hotline service to facilitate early detection, and
- independently performing, or assist with, investigations into alleged or suspected fraud.
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