FRAUD

Fraud is a deliberate act (or failure to act) with the intention of obtaining an unauthorized benefit, either for oneself or for the institution, by using deception or false suggestions or suppression of truth or other unethical means, which are believed and relied upon by others. Depriving another person or the institution of a benefit to which he/she/it is entitled by using any of the means described above also constitutes fraud.

a) Financial statement fraud
– This type of employee fraud involves deliberately changing company financials in order to mislead users. These alterations always create an illusion of success. More often than not, financial statement fraud is committed by management to hit certain targets or achieve specific objectives. Here are a couple of examples:
– Example one: A company leader alters the financial statement to make the organisation’s stocks appear more attractive. As a result, investors become interested and their stock price rises.
– Example two: A manager needs a bank loan. To obtain approval they misstate their financials so it appears as though they can quickly pay off the loan.

b) Asset misappropriation
– Defined as fraud involving third parties or employees stealing from an organisation through fraudulent activity, asset misappropriation can take a lot of different forms, including:
i. Deception by employees.
ii. False expense claims.
iii. Embezzlement by altering accounts or creating inaccurate invoices.
iv. Payroll fraud by diverting payments.
v. Data theft and intellectual property theft.
– Asset misappropriation is a large umbrella term for a lot of different types of employee fraud and can be committed by company directors or anyone else entrusted to hold and manage the assets and interests of an organisation or its employees. However, asset misappropriation does exclude straight theft from an organisation by insiders. For example: stealing stationery or other physical assets.

c) Corporate credit card fraud
– Corporate credit card fraud occurs when an employee uses the company card for personal gain or purchases instead of legitimate business purposes. Conducting regular checks of your credit card statements will help you pinpoint red flags.

a) Business impact
Costs for dealing with fraud against government programs are significant and go well beyond the direct financial loss. They can include assessment, detection, investigation and response costs as well as potential restitution. In addition, further costs can include program reviews and audits, and retrofitting or redesigning programs.

b) Industry impact
Fraud can result in distorted markets where fraudsters obtain a competitive advantage and drive out legitimate businesses. It can affect services delivered by businesses and expose other sectors to further instances of fraud. It can also result in greater burdens on charities and community services that help those affected by fraud.

c) Reputational impact
Fraud can affect any entity. However, when it is handled poorly, fraud can result in an erosion of trust in government and industries, and lead to a loss of international and economic reputation. This is particularly true when fraud is facilitated by corruption.

d) Human impact
Fraud is not a victimless crime. Fraud can be a traumatic experience that often causes real and irreversible impacts for victims, their families, carers and communities. Those who rely on government services (such as the elderly, the vulnerable, the sick and the disadvantaged) are often the ones most harmed by fraud. Fraud can have a devastating impact on these victims and increase the disadvantage, vulnerability and inequality they suffer. Fraud can also cause lasting mental and physical trauma for victims. Fraud also results in lost opportunities for individuals and businesses.