Look, who is cheating your firm

New Delhi: A typical fraudster is male, between 36 and 55 years old, typically works in the financial department, and commits the deed alone.

These are some of the findings from the “Profile of a Fraudster Survey 2007” conducted by KPMG, a worldwide leading network of audit and advisory services firms.

The first-ever study analysing actual fraud cases clearly reveals that the perpetrators primarily exploit inadequate internal controls for their own benefit – resulting in substantial material and immaterial damage for the company.

The survey also reveals that most fraud offences are committed by management and by the time he starts profiting from his illegal means, he has usually been employed by the company for six or more years. He is driven to crime by a desire for money and by opportunity.

“Over 60 per cent of the perpetrators are members of top management. Senior managers have access to confidential information, and due to their position, it is easier for them to bypass internal controls and inflict greater damage to the company overall,” said Executive Director and Head of KPMG Forensic in India Deepankar Sanwalka.

The profile of fraudster was generated from a study of 360 actual cases of typical financial fraudsters by the forensic departments of KPMG in Europe, the west Asia, India and Africa.

The companies questioned for the purposes of the study were not selected randomly; rather, this is the first analysis of real-life investigations carried out in recent years.

“Both large and small businesses can be affected by this and suffer considerable material and immaterial losses,” said Sanwalka indicating how great the risk for business from fraud is.

As the study reveals that fraudsters are usually repeat offenders, in 91 per cent of the cases investigated, they committed several offences before they were discovered.

The offences are nearly always committed over an extended period: in some 76 per cent of cases, the case goes back more than six months, and in 33 per cent of instances, three years or more, reveals the study.

In India and west Asia, corruption accounted for the most common fraud at 33 per cent followed by theft of cash and theft of other assets at 24 per cent and 17 per cent respectively.

Additionally false financial reporting, embezzlement and kickbacks were also significantly common types of fraud that fraudsters committed.

In most cases, the perpetrators exploit weak internal controls, in which the offences are usually discovered through anonymous tip-offs – they rarely come to light through internal controls.

Due to sensitivity of the topic, two-thirds of companies issue incomplete information or none at all about the incident. Employees, authorities and media are rarely informed for fear of a negative image.

Consequently, offences only occasionally undergo criminal investigation. Mostly, independent investigations are carried out without the police or the public authorities being informed.

The financial damage inflicted by fraudsters is severe. In most cases, the affected companies have to bear the losses themselves.

“Companies rarely succeed in making good the financial damage,” said Sanwalka.

(Source: "Profile of a Fraudster Survey 2007" conducted by KPMG International)