By Chris Dougherty, General Manager, Westlawn Insurance 13 November 2013
Have you given much thought to crime and fraud occurring within your business? If not, consider these statistics: The estimated cost of fraud in Australia is $8.5 billion annually, the average fraud in Australia and New Zealand amounts to $3 million, 60% of fraud cases take over 3 years to detect, 61% of fraud cases result in no recovery, and 50% of Australian businesses experience economic crime.
And finally, it’s estimated by Australian underwriter, Dual, that less than 5% of businesses have insurance to protect against crime and fraud occurring within their business.
Dual, one of a number of insurers offering crime and fraud insurance, has first hand experience in dealing with fraud within its own business. Earlier this year, it was discovered that a senior claims manager based in Melbourne had defrauded the company of $17 million by setting up a law firm with her husband and invoicing the underwriter for bogus legal work.
Damien Coates, CEO of Dual Asia Pacific, described the case as a wake up call. “Everyone focuses on insuring the material assets and think they will not become a victim of fraud. But the reality is it is an endemic part of society and businesses have to protect themselves on this risk the same as they do on any other risk,” Coates said.
Protecting your business
Specialist insurers offer a range of crime and fraud policies to protect your business. Depending on the specific policy, crime and fraud policies can cover for losses resulting from:
Theft or forgery by an employee
Theft of money and securities by third parties within or from your business premises
Destruction, disappearance or theft of money and securities while in transit
Electronic Funds Transfer (EFT) theft
Employees overpaying wages and syphoning money from bank accounts
Accepting in good faith either counterfeit currency, forged cheques or postal or money orders, and
Credit card fraud.
Profile of a fraudster
A new study by KPMG International has found that over half of all fraudulent acts committed against businesses are perpetrated by an employee of the business.
According to KPMG’s findings, the typical fraudster:
Is 36 to 45 years old
Generally acts against their own organisation
Holds a senior management position, generally in a finance, operations or sales & marketing role
Has been employed by the organisation for more than 6 years, and
Has acted in concert with others in committing the fraud.
Simple steps to prevent fraud
Besides insuring against losses from crime and fraud within your business, there are some practical steps you can take to reduce the risks.
For example, implement internal controls within your business to prevent and detect theft, such as requiring dual signatories, installing security cameras and opening avenues for employees to report fraud or theft in confidence.
When hiring new employees, conduct background checks via employment screening services such as: