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Kiwi businesses plagued by fraud

New Zealand has jumped up the global economic crime rankings for reported fraud, with cybercrime emerging as the latest threat to businesses.

New Zealand has jumped up the global economic crime rankings for reported fraud, with cybercrime emerging as the latest threat to businesses.

Nearly half – 49.5 percent, to be exact –  of the 93 New Zealand respondents to the 2011 PwC Global Economic Crime Survey say they have suffered fraud in the past year, putting us at fourth place in 2011 (out of 78 countries).

This ranks New Zealand in a higher position than Australia (47 percent), the US (45 percent) and the global average (34 percent) for reported levels of fraud among the 3,877 global survey respondents.

Compared to 2009, when New Zealand placed eighth out of 54 countries, the survey found almost all sectors experienced a rise in fraud, with the top-three sectors in New Zealand coming from the retail and consumer (80 percent), energy and mining (71 percent) and government (60 percent) sectors.

PwC forensic services Partner Eric Lucas said in the uncertain economic environment, incentives to commit fraud appeared to have increased.

“For the first time, cybercrime has been included in the survey and is now New Zealand’s third most reported type of economic crime. The survey shows cybercrime is taking off. Criminals are becoming more sophisticated in their approach as they have identified how organisations have a reliance on technology and the fraudsters are acquiring the technical skills to take advantage of low risk and high rewards."

Yet New Zealand businesses are not taking the threat of cybercrime seriously, with 39 percent of respondents saying they hadn’t had any cyber security training in the past year.

Corruption and bribery levels are low, but increasing – 3 percent of New Zealand respondents had suffered bribery or corruption in the past year compared to a global average of 10 percent, representing a threefold increase since 2009.

Asset misappropriation was again the most prevalent form of economic crime in New Zealand (74 percent).

Of the Kiwi respondents who suffered losses, 65 percent lost less than $135,000 but two respondents lost more than $6.7 million.

Lucas said some businesses were reluctant to deal with perpetrators in a way that would deter future crimes.

"Fraud continues to be a persistent fact of business life in New Zealand and significantly impacts both large and small businesses, with organisations facing internal and external risks,” Lucas said.

Of the 39 percent of detected frauds that came from tip-offs, only 2 percent were reported through formal business channels, such as a whistleblower hotline.

“Businesses need to ask themselves, what happens when the person suspected of committing fraud is also the person responsible for detecting it? And when a fraud was detected, why did just 21 per cent of New Zealand organisations give the fraudster nothing more than a formal wrap over the knuckles?”