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PricewaterhouseCoopers report reveals the shocking extent of white collar crime in Australia

Posted by on in Justice against White Collar Criminals
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Christopher Russell Hill, 24, is accused of sharing sensitive information with his friend

Christopher Russell Hill, 24, is accused of sharing sensitive information with his friend who worked at NAB. Source: News Corp Australia

FRAUD. Insider trading. Bribery and corruption.

They’re the insidious crimes committed by white collar criminals. Now new research reveals the extent of corruption in Australian organisations.

PricewaterhouseCoopers’s latest report Corruption: From the boardroom to the backroom surveyed more than 5000 people in 95 countries, more than half of whom were senior executives. A snapshot of the findings show:

• 57 per cent of Australian organisations experienced white collar crime in the last two years.

• 47 per cent suffered more than 10 fraud incidents over this time.

• One third of organisations lost more than $1 million.

• Perpetrators are likely to be male and university educated.

• 65 per cent work in middle management.

 

Nearly six out of ten Australian organisations have experienced white collar fraud in the

Nearly six out of ten Australian organisations have experienced white collar fraud in the last two years, according to a new report. Source: Supplied

“We see brazen sorts of things quite often,” said PricewaterhouseCooper’s forensic services partner Malcolm Shackell.

“Very obvious collusion between employees and external parties [things like] illegitimate invoices with very inflated prices being signed off. We’ve also seen a real rise in expense-related fraud. Not nickel and dime stuff, staff or executive expenses in the hundreds of thousands of dollars where organisations just aren’t focused on what is going through the expense system.”

Australian organisations have reported significantly more economic crime than global neighbours in the last two years, with a 10 per cent increase to 57 per cent. In comparison, just 32 per cent of companies in the Asia Pacific region described themselves as victims.

 

Industries like mining and construction were more likely to experience fraud in the procu

Industries like mining and construction were more likely to experience fraud in the procurement process according to the report. Pictured, a construction worker in the US. Source: AP

The ‘big five’ crimes include asset misappropriation, cybercrime, procurement fraud — including bribery and falsifying expenses — accounting fraud, bribery and corruption, according to the report.

Mr Shackell said most of the crime occurs where money leaves a business with a surprisingly high amount in the procurement process of awarding contracts to companies.

“It occurs on the cost side, contractors, suppliers, even expenses ... We have a saying: “It’s easier to hide a tree in a wood than a car park.”

“In Australia, we think its particularly prevalent in construction, mining, utilities; any of these industries where there is a relatively high use of contractor-type relationships.”

 

Invoicing and expense fraud were two of the most common workplace crimes.

Invoicing and expense fraud were two of the most common workplace crimes. Source: Supplied

He said a common example is inappropriate relationships between a middle management insider who can authorise payments and an external contractor. The outsider might inflate invoices which are paid by the company, with the pair pocketing the extra.

For companies acting overseas, the biggest risks include corruption, money laundering and antitrust behaviour. Australia has also seen a rash of insider trading cases recently — where people seek to profit on the stock market through insider information.

One high profile example saw an Australian Bureau of Statisctics worker who allegedly leaked market-sensitive information to a former university friend, netting the pair $7 million according to police. ABS acting statistician Jonathan Palmer told a Senate hearing into the issue the breach was unprecedented but “it’s a very difficult threat to counter.”

“If someone has a trusted need to access the number and they only have to leak an aggregate number or communicate in some obscure way that the number is contrary to market expectations, there's no requirement for them to take [numbers] out of the building,” Mr Palmer said.

 

Perpetrators of white collar crime tend to be males in middle management, the report stat

Perpetrators of white collar crime tend to be males in middle management, the report states. Source: Getty Images

When white collar crime does happen, the perpetrators tend to be male, middle management staff members between 31-40 years old. They’re also becoming increasingly qualified, with 30 per cent holding a tertiary degree. Nearly 74 per cent of organisations said the most common reason for the crime was the opportunity and ability to do it.

While white-collar crime in Australia may be high, Mr Shackell said this could also suggest effective detection and the tendency for Australian organisations to take crime seriously. Australia led its peers in terms of internal audits, with 67 per cent of organisations saying they would notify authorities about external fraud.

Mr Shackell said he attributes the recent increase to better detection including whistleblower programs, more scrutiny and audits and awareness of the risks.

“That point about clarity is really important. What we’re starting to see is organisations getting better around training in ethical behaviour.”

Have you experienced white collar crime at your organisation? Email This email address is being protected from spambots. You need JavaScript enabled to view it. with your experience or continue the conversation on Twitter @newscomauHQ | @Victoria_Craw

 

Source: http://www.news.com.au/finance/business/pricewaterhousecoopers-report-reveals-the-shocking-extent-of-white-collar-crime-in-australia/story-fnda1bsz-1226944320514

 

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New Zealand Fourth For Internal Organisational Fraud and Theft

February 13, 2013

New Zealand is perceived as being the least corrupt nation on earth, but perception doesn’t always match up to reality.

Many of New Zealand’s largest businesses listed on the NZX50 don’t pass some fundamental best practice ethics tests and fraud is rife in smaller businesses, government departments are not immune, nor are universities free from “financial irregularities”

About half of New Zealand firms have experienced fraud a respected survey has found.

In 2011 the Pricewaterhouse Coopers Global Economic Crime Survey  found that 49.5% of respondents indicated they had been victims of at least some level of fraud during the last year, up from 42%  in 2009

“New Zealand ranked fourth out of 78 countries as one of the most likely to experience fraud, slightly better than Britain, but worse than Australia and the United States.” source

Another company KPMG has produced a fraud barometer for New Zealand, saying that Fraud is a constant and serious threat to all sectors of the New Zealand economy, including commercial business, governments, non-profit organisations, and individuals

“…the incidence of ’super frauds’ continues to drive the aggregate value of frauds to record annual levels.

Super-frauds are defined as cases where the value is greater than $3m.

KPMG Fraud Barometer – June 2011: – key insights

  •  Value of large fraud cases, defined as over $100,000, totalled $79.8m (down from $100m in the last period)
  • There were 29 cases in total (down from 30 in the last period) Of the 29 cases, three were ‘super-frauds’, these totalling $62.9m
  •  One of the super-fraud cases, a result of a ‘kiting’ scheme valued at $39.6m, accounts for practically half of the value of total large fraud cases in the survey period.

“These figures show that there has been no let up in large frauds continuing to occur and brought before the New Zealand courts. Fraud is a constant and serious threat to all sectors of the New Zealand economy, including commercial business, governments, non-profit organisations, and individuals,” says Stephen Bell, Head of Forensics at KPMG New Zealand…”

The largest employee theft committed in New Zealand was by former ASB investment banker Stephen Versalko, who stole $17.8 million over nine years. source.

The largest (alleged) fraud in New Zealand’s history, amounting to $1.7 billion involves five people in the affairs of South Canterbury Finance.  source

How is it that a country with such a high fraud profile also has a low perception of corruption.

“New Zealand’s high trust society is both a national treasure and an economic asset. Forbes magazine ranks New Zealand first on its most recent list of the Best Countries for Business thanks to a transparent and stable business climate. According to Phil O’Reilly Chief Executive of Business New Zealand “New Zealand’s high trust public sector is it’s greatest competitive advantage.”

Could it be because so few companies have policies explicitly prohibiting bribery and facilitation payments? If the policies don’t exist there’s nothing to contravene, no rules to be broken?

“It appears to be that many of New Zealand’s largest listed businesses don’t pass some fundamental best practice ethics tests” says Transparency International New Zealand.

”Of the companies on the NZX 50, 44% have policies prohibiting bribery and 18% have policies on regulating facilitation payments. This does not compare favourably with the percentage of companies prohibiting bribery in comparable markets overseas. Of the top 100 companies by market capitalisation in the UK, 72% have explicitly prohibited giving and receiving bribes. In Europe the figure is 57% and in the US it is 69%.”

It’s not just listed companies that are suffering from this problem in New Zealand, its “high trust public sector” has also been blighted by light fingered employees, some of whom go undetected for years and steal vast amounts of money, mostly to fund lavish lifestyles.

A few days ago Hamilton woman Anita Gail O’Connor was jailed for two years and five months after admitting to charges of corruption and tax fraud. Amazingly her criminal activities continued for five years before she was caught.

“An IRD employee allegedly created fake passports, birth certificates, IRD numbers and application forms for her own monetary gain.  Anita Gail O’Connor, 59, of Ngaruawahia, pleaded guilty to 163 fraud-related charges that spanned a five-year period. Her charges included corruptly using information obtained by her in her official capacity, in the names of various people, to obtain a child support refund and working for families tax credits and making false documents to obtain child support refunds.

She was also charged with obtaining information on members of the public to obtain working for families tax credits, creating fake IRD number applications with intention to use them to obtain pecuniary advantage; using the IRD’s computer system to get information to get child support refunds and working for families tax credits. Taking passports from Victoria, New Zealand and Western Australia for pecuniary advantage; making false requests for clients to obtain child support refunds; making false child support refund requests to obtain pecuniary advantage and making false birth certificates to obtain working for families tax credits.” source

Alarmingly this woman cited gang links as one of the reasons why she committed these crimes, raising questions about the effectiveness of staff vetting at the IRD and whether other staff also have these associations. She also admitted to using some of the money to “buy cars, goods and groceries and for gambling”  – in other words a lavish lifestyle, that seemed to go unnoticed.
.
There have been other government departments tinged by the stench of corruption too. Unfortunately some of the sentences handed down haven’t been much of a deterrent to others, giving the impression that white collar crime goes largely unpunished in New Zealand.
“Following a 2.5 year old investigation by the Serious Fraud Office a former ACC national property manager, Malcolm David Mason, 50, received an 11 month home detention sentence after he pleaded guilty to three charges of bribery and corruption. He admitted to taking a of $160,000 bribe from a property developer and a business class trip to the 2008 Singapore grand prix.-
Even the NZ military and the judiciary has been touched by fraud and dishonesty:
“Four NZ military officers seconded to the United Nation Dept of Operations in New York allegedly made false declarations to obtain overseas allowances. A military court found the allowances had been paid illegally and the Auditor General slammed the culture within the defence force that allowed it to continue…”
“Papamoa Justice of the Peace Martin Elliott has resigned after being convicted of fraud. Elliott, a former principal of Hamilton’s Fraser High School, pleaded guilty in January to two charges of using a document for pecuniary advantage and was last month sentenced to 40 hours’ community work.” Elliott altered invoices to obtain about $6000, including “work done on his personal property that was invoiced as part of a school construction project.” (March 2012) source

How exactly is it that New Zealand is perceived to being a country free from corruption, who influences these decisions and who stands to gain from them?

If you have experienced fraud or corruption in New Zealand we’d like to hear from you, leave your comments at the bottom of this page.
  • Fraud and dishonesty in New Zealand Wiki
  • White collar crime overlooked (radionz.co.nz)
  • IRD worker jailed for $225,000 fraud (stuff.co.nz)
  • When staff have sticky fingers (stuff.co.nz)
  • Accounting fraud on the rise (accountkeeper.com)
  • False-passport case highlights gap in NZ’s border security (nzherald.co.nz)
  • Reward scheme being mulled for fraud whistleblowers (radionz.co.nz)

Source: https://e2nz.org/tag/pricewaterhouse-coopers-global-economic-crime-survey/

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  • Denise
    Denise Monday, 09 June 2014

    White Collar Crime is rife in Australia thanks to lazy and inept regulators. If those who worked for the regulator are appalled at what advice was given to Governments during the past two decades then now is the time for documents to be floating around in brown paper bags. We have broken open many big scandals in the past when a few people became a ground swell of discontent. Retirees across the nation have lost billions of dollars 10 days after receiving their super payments and with Banks only paying low interest that trend will escalate as people try to find "where is safe to park my super that took me 40 years to accumulate?" The safe answer does not lie with financial planners or commissioned only agents of the banks. The industry of financial advice will tell you all the benefits and none of the risks - read the horror stories on our website from previous blogs. Pensioners are also now caught by in White Collar Criminal activity in the executive suites of our Major Banks. How do pensioners losing their homes or retirees losing their super assist the economy? The Ombudsmen are moving the deckchairs and FOS is shoving all its 30,000 complaints onto COSL: - or trying to. What a Mess! Ask not what BFCSA can do for you, ask what YOU can do for BFCSA. We have provided the only reputable vehicle for consumer protection where we will show you the documents and the statistics to explain to the next generation how our banking system is maggoted to the core. Become Involved. [email protected]

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