by Divina Paredes

A third of NZ organisations victimised by fraud in past two years: PwC

Feb 19, 20144 mins
Business ContinuityCareersCompliance

One-third of New Zealand businesses have been victimised by fraud in the past two years, and 70 per cent of these were committed by insiders, reports PwC.

The ‘Big Five Frauds’ affecting local businesses are theft (70 per cent); procurement fraud (19 per cent); bribery and corruption (15 per cent); human resources fraud (15 per cent); and cybercrime (11 per cent), says PwC in its 2014 Global Economic Crime Survey.

How to spot the culprits? PwC says the typical New Zealand fraudster is aged 31 to 40 (32 per cent), male (58 per cent), educated to high school level or less (47 per cent), and has been with the company for five years or less (74 per cent).

Next: How does New Zealand compare with Australia, globally?

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PwC says this year’s survey is one of its most comprehensive reports on economic crime, with 5000 respondents from 95 countries, including New Zealand which had over 80 respondents.

New Zealand’s economic crime figures are lower than the global average of 37 per cent, and significantly below neighbouring Australia at 57 per cent.

While business confidence is high and the economic outlook looks bright, fraud is an unfortunate downside for businesses, notes PwC.

“Fraud continues to hit New Zealand companies in the pocket – and while it can be hard to measure the cost of goods falling off the back of trucks, kickbacks, the theft of intellectual property and ideas – we know that financial costs are far from the only or most costly concern,” says Eric Lucas, PwC forensic services partner.

“Economic crime erodes employee morale, damages external relationships, tarnishes your reputation and the bottom line. This may explain why some fraud goes unreported,” he states.

“While the survey suggests New Zealand ranks lower for economic crime than many other countries, it must be asked whether our organisations are adequately monitoring and aware of fraud and security breaches or simply not reporting them,” says Lucas.

Cyber worries are moving up the threat radar and on the minds of the C-suite. Eric Lucas, PwC

“For example, global respondents told us around a quarter have been a victim of cybercrime compared to New Zealand’s 11 per cent,” says Lucas. “Significantly, our respondents expect cybercrime to be double from current reported levels to 22 per cent, over the next two years.”

Lucas says the survey results show New Zealand business leaders are beginning to take the threat of cybercrime seriously, with 4 in 10 worried about cyber threats and the lack of data security. “Cyber worries are moving up the threat radar and on the minds of the C-suite.”

Being a systemic problem, cybercrime’s direct economic impact can be exceeded by the effect on employee morale, brand and reputation, notes Lucas.

Related: Global Information Security Survey 2014: On the defence Are New Zealand organisations prepared for the constantly evolving information security threat landscape? How do they compare with their global counterparts?

The survey, meanwhile, found 71 per cent of New Zealand respondents have a whistle-blowing mechanism, with 37 per cent of crime detected through tip-offs. Corporate controls are also responsible for detecting 56 per cent of crimes.

Procurement fraud: A double threat

For the first time this year, PwC asked respondents about procurement fraud, which affected 19 per cent of New Zealand organisations. Procurement fraud is a double threat, says PwC, victimising businesses both in their acquisition of goods and services and in their efforts to compete for new opportunities.

“The Canterbury rebuild is continuing apace, we’re trading more with emerging markets, face rapid urbanisation in cities such as Auckland ? and with our digital capabilities eliminating the tyranny of distance businesses have faced for so long ? new threats have arisen with fraudsters increasingly turning to technology to assist their criminal activities,” says Lucas.

“New Zealand organisations must remain alert to the threats they face, particularly in this environment where we can expect investment activity to accelerate. Businesses may not know if their organisation is being targeted by fraudsters or not.”

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