It’s common to be surprised when you hear stories of internal fraud, as the victim recounts a story of a trusted staff member caught stealing from the business, sometimes over many years.
"Be shocked if one of your employees or a colleague breaches your trust but don’t be surprised by it."
Greg Scott, Senior Governance Manager, ANZ NZ
It may be hard to understand how someone may be driven by a gambling or drug addiction, have serious financial problems or a desire for a lifestyle well out of their reach but it happens all the time.
Most people have not experienced issues like this and we don’t anticipate our colleagues or employees could have the motivation to steal. That means we may not put sufficient measures in place to prevent or detect fraud in its early stages and pay a high price as a result.
The cost of internal fraud to organisations globally is in the trillions of dollars each year. A 2016 Global Fraud Study from the Association of Certified Fraud Examiners (ACFE) suggests the median loss per organisation is $US150,000 per case.
Would the organisation you own or work for be able to survive a financial loss of this amount? While a large company may be able to absorb this loss, it may push a smaller business into serious financial difficulty.
What if the loss from internal fraud to your organisation was over $US 1 million? Close to 23 per cent of organisations in the ACFE study had suffered an incident resulting in a direct loss of over $US1 million.
How would a loss of that size impact an organisation’s reputation and what will be the flow on effects?
It is important to be able to trust employees at work and putting in fraud controls shouldn’t undermine this trust.
Having adequate processes in place means businesses are taking a very real threat to their finances and reputation seriously - not to mention protecting employees from the morale-sapping consequences of an internal fraud.
Joanne Pettifer, a Principal Forensic Accountant at the New Zealand Serious Fraud Office (SFO), has investigated numerous large internal fraud complaints over the last 18 years.
“I think as New Zealanders we are a bit too trusting sometimes - we don’t like to think someone we work with could be stealing from the company,” she says.
“In a perfect world trusting each other would be acceptable but unfortunately you don’t have to look far to see internal fraud impacts businesses quite frequently.”