VICTIMS of fraud can expect to recover less than 10 per cent of their losses, even where the perpetrators are caught and convicted, a national study has found.
PricewaterhouseCoopers director of investigations and forensic science, David Clements, said the results of the study highlighted the need for companies to focus on fraud prevention.
With the growing awareness of corporate fraud, accounting firms have targeted forensic accounting as a growth area.
Deloitte claims to have a lead in the local market, with a new recruit bringing to 11 the number of dedicated staff in its forensic accounting practice.
Michael Guest, formerly with Ferrier Hodgson, specialises in litigation support, or as he prefers to call it, dispute consulting.
His preferred title reflects his focus on early intervention, before disputes end up in the hands of lawyers and before the courts.
Deloitte forensic partner Martin Langridge said Mr Guest’s appointment was a direct result of the strong demand for forensic accountants in Perth.
As well as working on dispute resolution, Deloitte’s forensic practice also focuses on risk management and computer forensics.
Mr Langridge said the number of staff in forensic accounting in Perth had increased from just three people three years ago.
Mr Clements presented the results of the fraud study to the Institute of Chartered Accountants business forum in Perth last week.
The study, undertaken jointly by the Australian Institute of Criminology and PwC, was based on an analysis of 155 completed files from police and prosecution agencies in Australia and New Zealand.
Mr Clements said it contrasted with other studies that were based on perceptions of fraud rather than actual cases.
Nevertheless, the main findings were similar to those of KPMG’s regular fraud surveys.
“The report shows that serious fraud represents a major challenge for business and professions,” Mr Clements said.
It found the most common type of fraud involved obtaining finance or credit by deception (21 per cent) followed by fraud involving cheques (15 per cent).
The 155 files examined involved recorded losses of $260.5 million (which included some double counting), of which only $13.5 million was recovered at the time of sentencing.
Identity related fraud was evident in more than one third of cases, with 25 per cent of cases involving fictitious identities and 13 per cent involving stolen identities.
The most frequent way offenders disposed of their proceeds of crime was by purchasing luxurious goods and services such as motor vehicles or travel.
The next biggest categories involved spending on gambling and personal living expenses.
This reflected the fact that greed was the most prevalent motivation of offenders (27 per cent) followed by gambling (16 per cent).
Mr Clements said the typical corporate fraudster was an Australian-born male aged 41 to 50 years of age.
He said the study results highlighted the need for pre-employment screening, as one in four fraudsters examined already had prior convictions for fraud.