An Analysis of Two Fraud Cases in Australia - Case Study Example

An analysis of two Fraud Cases in Australia Student’s Name Institution Affiliation Introduction According to recent research carried by Smith in 2003, fraud has become a widespread problem across many countries both the developed and the developing. Fraud can be defined as a deliberate deception, which is made with an aim of achieving personal gain or damaging another person or entity (Cohen, 2006). In legal terms, fraud is considered as a breach of universal rule. According to Smith (2003), fraud can be classified into various categories, such as investment fraud, employee embezzlement fraud, costumer fraud, just to mention a few. However, it is important to point out that the main purpose of any type of fraud is to rob persons or organizations their money or assets. This is an analysis of two types of frauds that occurred in Australia in the last ten years and a comparison of their similarities and difference. Some strategies are recommended to be used by the victims or parties in mitigating these types of fraud. The first case: Northern Territory Victim of investment fraud (Published July 2012) Christopher Fulton, whose identity has been withheld, is a 48 year old carpenter residing in Northern Territory. Christopher had saved enough money to invest in the share market and purchase an asset property after his early retirement. However, his dreams were wiped away in the year 2011 when he los his savings to organized investment scam. Fulton reports that he started receiving calls from an unknown person, claiming to be an employee of accompany by the name Dachser Global Markets. As Christopher discloses in the report published by Australian Crime Commission (ACC) in 2012, after being contacted by the unknown caller several times, he decided to attend a professional seminar on market share and investment opportunities. The victim also researched the Dachser Global markets online and then consulted his wife before making the final decision of investing his money in the company. He first invested $5000 but after seeing his investment appreciate, he invested $40, 000 more. Mr. Fulton started doubting that all was not well when the company kept on insisting that he invest more. When he requested them for his money, the company cut all links and contacts with him. It was at this time that Mr. Fulton decided to make the police at Northern Territory aware of the fraud and also reported the incidence Australian Securities and Investments. Twelve months after Mr. Fulton was defrauded his money, he received another call from another unknown caller, who claimed to be a lawyer assisting investment fraud victims and promised him that he would help him get his money back. However, this time round, Mr. Fulton was careful and investigated the man and later came to realize that he was involved in serious organized investment fraud targeting fraud victims. The second case: ING, multinational insurance company losses $30m through employee embezzlement fraud (published February 2012) As Bibby reports in his 2012 article, ING, a multinational insurance and finance company based in Australia, lost over $30 million from the enormous fraud committed by a senior employee by the name Rajina Subramaniam. The records that were released after Subramaniam was found guilty of the crime indicated that the Company had only managed to get back a third of the money that the employer had embezzled. The employee had utilized most of the embezzled funds to buy luxury goods and property at a price above the market rates. Due to this reason, the company has not been able to recover most of the embezzled funds despite the fact that it has sold most of the property and goods that the employee had purchased. According to the court documents, the in-house safety measures at the company’s sector which Subramaniam worked in were inadequate. This is the main reason the employee was able to steal the huge amount of money over a long period of time without being detected. Since Subramanian was a senior employee, it was easy for her to make over 200 illegal money transactions either to her several personal accounts or directly to the agents of the shops and real estates that she was purchasing goods and properties. After making the illegal transactions, she would then use computer passwords of ex- employees to wipe away or change the records in order to legitimate the transactions. As Bibby explains, the court documents also raise concerns on how Subramaniam was able to acquire expensive jewellery and apartments without being detected. It is clear that Subramanian was able to establish close relations with some of the company owners that she bought her goods and property from and this is the reason as to why, they did not investigate the sources of her massive wealth. Key Differences and Common Features of the Two Fraud Cases Common features The main common feature in any type of fraud is the purpose of committing such an act. According to Cuganesan and Lacey (2003), the main aim of committing any kind of fraud is for personal financial gain. This is quite clear in both the two cases discussed. The person who defrauded Mr. Fulton off his family savings wanted to benefit himself financially. It is the same case with Subramanian because she committed the act to benefit financially and at the same time damage the company she was working for. The second common feature with frauds is that there is lack of adequate investigation prior to fraud. There is enough evidence that both the two cases occurred due to lack of thorough investigations. It is clear that Mr. Fulton failed to do a thorough investigation of the person and the company he claimed to work for before investing his family savings. On the other hand, Subramaniam stated during an interview after her arrest that she was able to embezzle the huge amounts of money because the supervisor left it open for her. This means that if the supervisor was more careful, Subramnian would not have gotten any opportunity to defraud the company. According to Levi and Smith (2011), most of the investment fraud cases occur due to failure to carry out a thorough research on the investment companies to ensure that they are legitimate. According to Green (2006), any kind of fraud can be termed as intentional or deliberate cheating and stealing. The person who commits a fraud, no matter its nature, does it deliberately. The company which defrauded Mr. Fulton did it deliberately for financial benefits. On the other hand, Subramanian deliberately continued to defraud the company she was working for because she was benefiting from the act. With the advancement in technology, most frauds are executed using high technology. In the first case, Mr. Fulton was defrauded over $40, 000 through the internet. Subramnian also utilized technology to make it easy for her to carry out her illegal transactions. Any kind of fraud incurs huge loss in term finances (Rollings, 2008). Both the two cases of fraud incurred huge losses and it is highly difficult for the victims to recover the loss. Differences According to Cohen (2006), there are major differences which exist among the various types of frauds. The fraud involving Mr. Fulton is an example of an investment fraud while the second fraud committed by Subramnian is an employee embezzlement fraud. There are several differences between these two types of frauds. According to Stuart (2006), just as the name suggests, an employee embezzlement fraud is committed by an employee with an intention of illegally using his or her employers’ assets or money for his or her personal gains. Stuart explains that many employee frauds are committed by senior employees who are trusted by their employers to carry out any kind of transactions. This is what happened with Miss Subramanian. She took advantage of her senior position and the fact that her employer trusted her enough not to supervise her to defraud him. Whereas an employee commits an employee embezzlement fraud, an investment fraud is committed by all kinds of fraud perpetrators (Cohen, 2006). People specialize on how to organize investment fraud in order to trick unsuspecting investors into investing their money into hollow proposals. Therefore, while employers are the victims of employee embezzlement fraud, investors are the main victims of investment fraud. Unlike in an employee embezzlement fraud where the transactions occur without the knowledge of the victim, the victim of an investment fraud is aware of the transactions that take place. This happens because the perpetrator first establishes a close relationship with the victims in order to win their trust and hence be willing to transact with them. Recommendations on how victims and other concerned parties could prevent these types of frauds. According to Smith (2008), fraud is very costly and hence its prevention is the most cost-effective strategy to mitigate it. Fraud prevention entails two fundamental activities: creating and sustaining an ethical and honest culture and assessing the risks of fraud, developing strategies to mitigate it and getting rid of all the opportunities of fraud. Investment fraud victims can easily prevent this type of fraud through thorough investigations. From the analysis carried on this type of fraud, its main cause is due to lack of thorough investigations before investment. The research carried out by Gill, Hart and Stevens in 1996 indicate that fraud private investigators are being overlooked and underused in the prevention of fraud. Investors should utilize private investigators to investigate on their behalf the legitimacy of the companies they want to invest in before transacting with them. According to Levi and Smith (2011), investment fraud can also be prevented by encouraging investors to undergo training on early fraud detection before choosing the companies they want to invest in. Through this kind of training, the investors will be equipped with the necessary skills of detecting any signs of fraud early enough before they are robbed off their assets/finances. The police are also crucial in the prevention and mitigation of any kind of fraud. They should ensure that firm and consistent actions are taken against the perpetrators in order to discourage people from committing such crimes. According to Australian National Audit Office (2010), there are various strategies that organizations or employers can put in place in order to prevent employee embezzlement fraud. One of these strategies is by cultivating and maintaining an organization culture which is honest and ethical. Employers should ensure that their top management model appropriate behavior in order to guide the junior employees on the behavior appropriate and desired in the organization. According to Smith (2008), employers should ensure that they lay down strategies that will enable them hire the right kind of employees in order to prevent fraud. Employers or organizations should also formulate and implement policies for handling fraud. It is also important that organizations create a positive working environment for their employees and pay them well in order to discourage them from committing frauds. According to Rollings (2008), employee fraud is highly costly for employers. Therefore, employers should not count any loss in training their employees on fraud awareness in order to equip them with the skills of detecting any kind of fraud by any of their colleagues early enough. Conclusion Fraud is a crime which has become rampant not only in Australia but across many nations. There are various types of frauds but all of them have a common feature in that they are committed for personal gains. As explained earlier in this paper, investment fraud is committed by a perpetrator in order to rob an unsuspecting investor his or her money/assets. On the other hand, an employee embezzlement fraud is committed by an employee to rob his or her employer money or assets for personal gains. The main similarity between these two types of frauds is that they are all committed with an intention of deceiving and stealing. The difference is that an investment fraud is committed by a perpetrator and the victim of this kind of fraud is an unwary investor. On the other hand, the victim of an employee fraud is the employer and it is committed by an employee. These two types of frauds can easily be prevented through strategies such as, use of private fraud investigators, taking firm and consistent action on perpetrators, training investors on early fraud detection, hiring the right kind of employees, formulating and implementing policies to prevent fraud among others. References Australian Crime Commission (ACC) (2012). Serious and Organized Investment Fraud in Australia. Australian Institute of Criminology. Retrieved from http://www.crimecommission.gov.au/sites/default/files/files/Galilee%202012/SOIFA_Report_040712.pdf Australian National Audit Office (ANAO) (2010). Fraud control in Australian Government agencies. Audit report no. 42 2009–10. Canberra: ANAO Bibby, P. (2012). ING takes a $30m hit in accountancy fraud case. Retrieved from http://www.smh.com.au/business/ing-takes-a-30m-hit-in-accountancy-fraud-case-20120215-1t6ru.html Cohen, F. (2006). Frauds, Spies, and Lies – and How to Defeat Them. ASP Press. Cornish, D.B., & Clarke, R.V. (2003). Opportunities, precipitators and criminal decisions: A reply to Wortley’s critique of situational crime prevention, in Smith M & Cornish DB (eds). Theory for situational crime prevention, Monsey, NY: Criminal Justice Press. Cuganesan, S., & Lacey, D. (2003). Identity Fraud in Australia: An Evaluation of its Nature, Cost and Extent. Securities Industry Research Centre (SIRCA). Australia: Standards Australia. Ekblom, P. (2010). Crime Prevention, Security and Community Safety Using the 5Is Framework, England: Palgrave MacMillan Gill, M., Hart, J., & Stevens, J. (1996) ‘Private investigators: Under-researched, under- estimated and under-used?’ International Journal of Risk, Security and Crime Prevention, 1(4), 305–313. Levi, M. & Smith, R. G. (2011). ‘Fraud vulnerabilities and the global financial crisis,’ in Trends and issues in Crime and Criminal Justice, No. 422, Australian Institute of Criminology, Canberra Rollings K. (2008). Counting the cost of crime in Australia: a 2005 update. Australian Institute of Criminology Research and Public Policy Series No. 91. Smith R.G. (2003). Serious fraud in Australia and New Zealand. Research and public policy series no. 48. Canberra: Australian Institute of Criminology and PricewaterhouseCoopers. Available at: http://www.aic.gov.au/ publications/current series/rpp/41-60/rpp48.aspx[Accessed on 20th March 2013] Smith R.G. ( 2008). Coordinating individual and organizational responses to fraud. Crime, law and social change 49(5): 379–396 Stuart G. P.(2006). Lying, Cheating, and Stealing: A Moral Theory of White Collar Crime. Oxford University Press. Read More