Top 5 fraud trends in 2015
Forensic Focus - August 2015
We are regularly asked to assist clients investigate suspected or actual fraud. Often these investigations involve certain fraud ‘trends’ that change over time. The following are the latest 5 fraud trends we have seen so far during 2015 and who we anticipate they may evolve over the next 12 months.
In no particular order:
1. Theft of intellectual property / confidential information
More and more we are engaged by clients to assist them to investigate concerns or suspicions that their employees (or ex-employees) may have stolen (or leaked to third parties) intellectual property or confidential information that belongs to the employer. During the past six months or so, we have seen a noticeable increase in this activity particularly with senior staff taking up new roles in new organisations.
A recent article that appeared in the NZ Herald where the employer was concerned that their ex-employee might have stolen IP to set up his own rival coffee business is a great example of the type of confidential information concerns that companies are facing (see http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=11480095).
2. False invoices
False invoicing frauds are the “oldie-but-a-goodie”. Creating false invoices, directing payment to a bank account the fraudster controls, has been used for many years by employees to misappropriate funds from their employers. It remains one of the most common types of frauds committed by employees in New Zealand. Despite the fact that it is not a new fraud, false invoicing continues to cost New Zealand businesses thousands of dollars each year. And 2015 is no exception!
Our article Employee Fraud: False invoicing provides more information about false invoices.
3. Email scams
Our clients and contacts have noticed a flurry of email scams hitting their inboxes recently (both at home and at work). Most of these are obvious (with poor grammar or spelling) – like the recent email scam targeting school staff that appeared in the media (see http://www.stuff.co.nz/technology/digital-living/70141309/school-staff-are-being-targeted-in-email-scam-asking-for-money.html).
However recently, the email scams we’ve seen have become particularly sophisticated, which causes the victims to lose significant sums of money. You can read more information about the sophisticated email scams in Identifying email scams that target businesses
4. False expense claims
Employees who falsify expense claims are on the rise again. Whilst often not involving big sums of money, we are again seeing situations where senior employees in particular are looking to submit expense claims to get reimbursed for either non-existent items or for what are in reality is personal rather than business-related expenses. Often they manifest themselves as inflated amounts or are duplicated expenses already paid for in other ways. Like false invoices, false expense claims are also an oldie-but-a-goodie and they continue to be used by employees to commit fraud against their employers in 2015.
5. Financial misstatement
Financial misstatement fraud involves deliberate misrepresentation, misstatement or omission of financial statement data for the purpose of misleading the reader and creating a false impression of an organisation's financial strength. Often financial misstatement fraud is committed in order to secure investor interest (e.g. the failed finance companies) or obtain bank approvals for financing, or for justification for bonuses or increased salaries etc.
The trending area of financial misstatement fraud involves public and private sector organisations providing false data or operational information in order to obtain grants or extra funding beyond that which they would normally receive.