Spike in NZ 'super fraud' cases

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The value of 'super fraud' cases brought before New Zealand courts surged to $62.9 million during the first half of the year, with the Government bearing the brunt of most of reported fraud in New Zealand.

The Fraud Barometer report, conducted every six months by international auditing firm KPMG, shows the value of super fraud cases - those totalling more than $3 million - accounted for half of all large fraud cases in the six months to June.

The spike in the prosecution of super-frauds, which began in the second half of 2009, continued to drive the total value of fraud to record annual levels, KPMG said.

The Serious Fraud Office (SFO) was behind all three super-fraud prosecutions in the six months to June, one of which was a 'kiting' scheme valued at $39.6 million, KPMG said.

Kiting is dishonestly borrowing non-existent funds by taking advantage of the time lag between withdrawing the non-existent funds from a financial institution and the transaction being dishonoured.

Meanwhile the value of large fraud cases - totalling more than $100,000 - fell from $100 million during the last reporting period, to $79.8 million in the last six months. There were a total of 29 large fraud cases during the period, KPMG said.

KPMG New Zealand's head of forensics Stephen Bell said the figures demonstrated that fraud was a constant and serious threat to all sectors of the New Zealand economy.

"Recent court activity indicates that 2011 will reach record levels with over $200m in charges being laid by the SFO in the High Courts in the month of July alone.

"We can conservatively expect the aggregate value of charges in these 'super-fraud' cases prosecuted by the SFO to exceed $300m by the end of 2011.

"This more than doubles the super-fraud cases in 2010 valued at $143.9m," said Bell.

The survey found that the most common victim in fraud cases was the Government (10 cases) and the most prominent victims, by value, were financial institutions at $51.1m.

Both commercial businesses and Government had a lower average fraud per incident during the latest six month survey ($300,000 and $400,000 respectively).

"While there is no definitive reason why commercial businesses and the Government are suffering smaller average frauds, it is possible that greater resources are being deployed towards the prevention and detection.

The most common type of fraud was accounting fraud, reinforcing the need for organisations to have strong internal and financial controls, said Bell.