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Technology a key fraud enabler


Technology is a significant enabler for a quarter (24%) of the 750 fraudsters investigated by forensic specialists across 81 countries.

By contrast, KPMG’s new Global Profiles of the Fraudster report reveals that not enough proactive analytics are utilised in detecting fraud, with only three percent of the fraudsters being detected in this manner.

“The double edged sword of technology in fraud is only going to get sharper,” says Phil Ostwalt, global head of investigations at KPMG. “As technology becomes more advanced, so too do the schemes to use it maliciously.

“And, while it’s clear that fraudsters are all too comfortable making use of technology to perpetrate a fraud, we are seeing little evidence that companies are doing the same to prevent it. Threat-monitoring systems and data analytics are a must have for organisations on the look-out for anomalous or suspicious behaviour.”

Tech-savvy fraudsters are using technology in a variety of ways to perpetrate frauds. In these instances where fraudsters are using technology, about 24% entailed the creation of false or misleading information in accounting records, 20% involved fraudsters providing false or misleading information via email or another messaging platform and 13% involved perpetrators abusing permissible access to computer systems.

“In South Africa we see some similar trends in general, indicating that the attributes of fraudsters are somewhat universal, even though the face of the fraudster is ever changing and some country or region specific drivers do lead to slight differences,” says Nosisa Fubu, partner at KPMG Forensic in South Africa.

According to the report, the new fraudster has some identifying characteristics:

* Between the ages of 36 and 55 (69% of fraudsters investigated) (South Africa – 70%);

* Are a threat from within (65% are employed by the company) (South Africa – 58%)

* Could very well be executives or director level (35%) (South Africa – 9%), who have been with the company for at least six years (38%) (South Africa – 15%). For South Africa, management (no executive capacity) is highest at 46% followed by staff member at 21%.

* Have unlimited authority in their company and are able to override controls (44% of fraudsters investigated) (South Africa – 61%).

* Fraudsters are most frequently described as autocratic (18%) (South Africa – 18%) and are three times as likely to be regarded as friendly as not. (five times as likely to be regarded as friendly as not).

* Are likely esteemed, with 38% (South Africa – 33%) of fraudsters describing themselves as well-respected in their organisation.

* Likely to have colluded with others (62%) (South Africa – 73%) of frauds, down just slightly from 70% (South Africa – 92%) in the 2013 survey.

* While personal gain was the predominant overriding motivation for fraudster (60% ) (South Africa – 58%), greed was the second most common factor at 36% (South Africa – 49%) and the sense of ‘because I can’ was third at 27% (South Africa – 33%).

Weak internal controls were a factor for 61% (South Africa – 30%) of fraudsters and the problem appears to be growing.

The number of fraudsters who were able to commit their acts as a result of taking advantage of weak controls rose to 27%, from 18 percent in the 2013 report. These stats actually refer to: the number of fraudsters whose overriding motivation to commit their acts “because they could” rose to 27% (South Africa – 33%), from 18% (South Africa – 16%) in the 2013 report.

Even if controls are strong, fraudsters can and do evade them or override them. Colluders were able to circumvent strong controls in 11% (South Africa -18%) of the cases and an additional 21% (South Africa – 42%) recklessly defrauded with no regard for the controls.

Other key findings include:

* Fraud is more frequently perpetrated in collusion with others than alone (62% (South Africa -73%) against 38% (South Africa – 27%) respectively).

* While most collusion happens in mixed company (46%) (South Africa – 71%), men still tend to collude more than women do (39% (South Africa – 21%) of colluders are groups of men versus 7% (South Africa – 8%) of colluders are groups of women

* External parties are involved in 61% (South Africa – 67%) of the instances where the fraudster is colluding.

* 44% (South Africa – 52%) of fraudsters were detected as a result of a tip or a complaint; a further 22% (South Africa – 27%) were detected as a result of a management review.

“Globalisation and regulation are just a few of the megatrends for why controls are more important than ever in business today,” says Ostwalt.