Fraud

The term fraud encompasses a wide variety of corrupt, deceptive, dishonest or unethical behaviours. Fraud can be by employees (internal fraud) or by customers or suppliers (external fraud).

For more informations visit these sections below:

Fraud by employees (internal fraud)

Fraud includes employees undertaking any of the following actions:

  • theft of cash or stock
  • theft from other employees
  • not charging friends, family or accomplices
  • allowing accomplices to use bad credit
  • supplying receipts for refunds
  • allowing friends to steal
  • participating in delivery scams.

Sometimes employees will rationalise the fraud by:

  • trivialising the offence: "They can afford it", "No harm done", "Everyone does it"
  • claiming unfair treatment as a justification
    • missing out on promotion
    • feeling remuneration is inadequate
    • unfair treatment compared to colleagues
    • disciplinary action
    • resentment at lack of appreciation.

    The risks of internal fraud include:

    • stolen, embezzled or "discounted" stock
    • loss of cash or securities
    • loss of company funds or critical information
    • loss or damaged business reputation and custom.

    You may be at risk of internal fraud by employees who:

    • work long hours
    • return to work after hours
    • are unusually or overly inquisitive about the company's payment system
    • resist taking annual or sick leave
    • spend excessive time in toilets or outside
    • avoid having others assist or relieve them
    • resign or leave suddenly
    • have a large number of voids
    • have a low number of transactions.

    Also, look out for registers that are consistently over or under, undelivered goods, and two or more transactions for a single credit card in a row.

    How to reduce the risks of internal fraud

    Step 1: Develop clear policies that cover:

    • serving or processing transactions for family and friends
    • personal purchases/transactions
    • personal use of equipment such as telephones, laptop computers and video cameras
    • training and education for staff
    • authorised delegations.

    Step 2: Have clear transaction procedures, including:

    • a pre-determined float
    • petty cash limits
    • daily banking, by two people if possible
    • dual signatures on cheques
    • provision of receipts and acknowledgment of transactions
    • limited access to safe by staff
    • keeping registers closed unless in use
    • segregating purchasing, receipting and paying.

    Step 3: Provide strong, consistent supervision of staff by:

    • having supervisors monitor delegations
    • supervise employee compliance with procedures
    • regularly review cash shortages and report instances where an explanation is unsatisfactory
    • having supervisors should check receipts and documentation
    • challenging suspicious transactions.

    Step 4: Regularly review and monitor your registers of assets and your transactions by:

    • recording all transactions
    • conducting regular stock takes
    • keeping a register of your tools, equipment and assets
    • engraving your business property with an identifying number (such as your ABN) where possible.

    Step 5: Establish strong audit procedures including:

    • reconcile bank deposits with register totals regularly
    • acquit all claims and allowances to avoid duplicate or multiple payments
    • audit IT systems regularly
    • conduct regular and random audits of all processes
    • randomly check wages and allowances for overpayments.

    Step 6: Maintain security of information by:

    • limiting access to confidential information
    • enforcing the use of employee ID
    • regularly changing passwords for computers and alarms
    • reviewing and investigating security violations
    • cancelling access promptly when people transfer or leave.

    Step 7: Establish strong human resource management procedures by:

    • undertaking pre-employment screening
    • implementing equitable remuneration system
    • providing job descriptions that segregate duties
    • providing adequate training and education
    • communicating policies, expectation of compliance, audit regime and consequences of non-compliance.

    Fraud by customers or suppliers (external fraud)

    Credit cards and EFTPOS fraud

    The risks include:

    • fraudulent monetary transaction on credit and debit cards
    • cards used at bank branches to obtain cash advances
    • cards used at merchant establishments in payment for goods and/or services
    • cards used at automatic teller machines to obtain cash advances
    • theft from the authorised holder
    • fraudulent manipulation of EFTPOS terminal by offenders.

    Credit card and EFTPOS fraud can happen by:

    • use of counterfeit credit cards
    • use of stolen/lost credit cards. Cards are often stolen from:
      • the glove boxes of motor vehicles
      • unattended clothing and handbags in business premises
      • within the postal system
      • cardholders letter boxes
    • lack of compliance with checking procedures by staff
    • insufficient security of EFTPOS terminal at point of sale.

    Credit card fraud

    Types of credit card fraud

    Credit card fraud can occur in a number of ways including:

    • Lost or stolen cards, which are being used by another person illegally.
    • 'Never Received Issue', which are cards stolen while in transit and used by another person illegally.
    • Fraudulent applications, which include cards issued on the basis of counterfeit or fraudulent documents.
    • Identity takeover, where people use ‘real names’, not their own, to gain a card fraudulently.
    • Card generator programs used to generate credit card numbers that appears to be legitimate cards.
    • Multiple imprints (either electronically or manually) of the cardholder’s cards at the time of payment.
    • Mail order, telephone order or Internet use of legitimate or fraudulent card details for the delivery of goods.
    • Skimming or copying of electronic data contained on the magnetic stripe on the rear of a legitimate card and used to re-debit the cardholder’s account at a later date or to encode a stolen or counterfeit card.

    Counterfeit plastic cards can be created fraudulently by:

    • Manufacturing a complete card and embossing and encoding stolen details.
    • Embossed only cards used at collusive merchants for manual transactions.
    • Encoded only white plastic for use through EFTPOS terminals (telephone, petrol pumps) or with collusive merchants (PIN input is required at some sites).
    • E-encoded or re-embossed genuine credit cards that have been obtained by theft, lost etc.

    How to identify a fraudelent credit card

    Credit cards are made with identifying features designed to reduce the possibility of fraudulent cards being used. You should familiarise yourself with these features to reduce the risk of fraud. These features are explained in Identifying fraudulent credit cards (PDF, 165KB).

    How to reduce fraud against you

    To help reduce fraud against you and your customers, you can do the following:

    • Switch off your EFTPOS machine at night.
    • Check card signatures.
    • Check that the card numbers on the front and back of the card match.
    • Make sure holograms are clearly visible.
    • Check for valid expiration date.
    • Ask for further identification if unsure.
    • Check for ghosting or shading used to cover-up changed numbers.

    Fraudulent cheques - a guide for small businesses

    Cheque fraud costs Canberra businesses thousands of dollars each year. Unfortunately, business owners are forced to compensate for financial losses by increasing the price of items for honest and responsible consumers.

    Although fraudulent cheques cannot be entirely eliminated, the risks inherent in accepting a cheque can be reduced by adopting thorough checking practices.

    How to limit the number of fraudulent cheques

    1. Make sure the information offered is current and matches the physical description of the customer. Match the signature on the cheque against the signature on the identification. Ensure the customer signs the cheque in your presence.
    2. Do not accept cheques that have been drawn in a bank interstate, even if the cheque is imprinted with a local address for the account holder.
    3. Ask the customer for their residential address if the only address provided on the cheque is a post office box number or another non-specific address. Ask the customer if the address on the cheque is their current address and ask for their phone number. Write these details on the back of the cheque along with the initial of the employee accepting the cheque.
    4. Do not accept post-dated or pre-dated cheques.
    5. Be cautious of people who buy an item with a cheque and then return later to purchase more items. In some cases the initial purchase may be a chance to test out your policies regarding the acceptance of cheques. Once the offender determines that you will accept a cheque without question, they will return to purchase items of higher value.

    Customers are important to local merchants. The vast majority of customers are responsible people however, a minority visit the ACT and other states and territories to purposely use 'bad' cheques.

    Be aware of interstate offenders

    Be alert when people drive interstate in order to purchase items that are commonly available in their local city or town. The most common reason for the offending person to do this is because they are notorious for using bad cheques in their local community and are forced to travel interstate to continue using fraudulent cheques.

    Please remember that you have no obligation to accept cheques for any purchase. If you feel uncomfortable about accepting a cheque from a customer, you have the right to ask for further information or identification.

    Counterfeit currency

    Polymer banknotes were first issued for general release in 1992 as $5.00 notes. Polymer banknotes were introduced because they offer greater security and are harder to counterfeit.

    How to identify counterfeit currency

    There are a number of security features on polymer banknotes, which can help you to identify counterfeit currency. They are:

    • plastic substrate
    • intaglio printing
    • clear window with design
    • micro-printing
    • Australian Coat of Arms
    • seven pointed star
    • in-built ultra violet security features.

    For more details about the polymer banknote security features, please read Identifying counterfeit currency (PDF, 817KB) or visit the Reserve Bank of Australia website.

    Portraits on Australian polymer banknotes

    The portraits on the Australian polymer banknotes are:

    • $5 - Her Royal Highness Queen Elizabeth II / Parliament House
    • $5 - Sir Henry Parkes/ Catherine Helen Spence
    • $10 - Banjo Patterson/ Dame Mary Gilmore
    • $20 - Mary Reibey/ Rev John Flynn
    • $50 - David Unaipon/ Edith Cowan
    • $100 - Dame Nellie Melba/ Sir John Monash

    (Source: Reserve Bank of Australia)