A huge increase in middle and senior managers scamming their employers to fund lavish lifestyles during the recession is behind a 25 percent jump in financial crime complaints being made to police, a private investigator says.
And the rise is predicted to continue as more companies bring in auditors and "data miners" to pick up on those who are ripping off the system.
In 2009, the police financial intelligence unit received 5000 reports on possible financial crime from a range of financial institutions, including banks, insurance companies, casinos and real estate agents, the officer in charge of the unit, Detective Senior Sergeant Ashley Kai Fong, said. In 2008, they received 4000 reports.
The reports are an indication of possible criminal activity and are often the starting point for criminal investigations. Kai Fong puts the increased reporting down to heightened awareness among institutions.
But Ron McQuilter, a director of Paragon private investigators, said his company had recorded about a 30 percent increase in financial criminal activity in the past year, "and most of that is corporate fraud".
"There has been a big increase in middle management and senior management stealing. A lot of that has been brought on by the lack of bonuses and the lack of an increase in pay rates.
"Gambling has always been a biggie. Drugs and P have always been a biggie. But the big increase has been in the people whose living standards have been affected [by the recession].
"People get used to a lifestyle and all of a sudden it's not there any more so they have said 'well here is an opportunity'."
But McQuilter, who has been a private investigator for more than 26 years, said the new breed of thieves were generally easier to catch because they were not as sophisticated.
"Companies need to start looking at the people who are first in the morning and the people who don't like it when companies are looking at the bottom line. There are a whole lot of red flags that come up that companies need to start being aware of."
Much of the scamming involved false invoicing, or using technology to create false documents, or false customers. "A lot of the stuff we see is electronic. It's not so much 'I'll just take some money from the till'. Good old New Zealand companies have slack practices and all of a sudden that can be the worst thing to do. Companies need to be doing audits."
McQuilter said police were more proactive than he had seen before.
Kai Fong said police were also seeing money laundering to finance traditional crime. He said information from financial institutions helped police investigate and prosecute crimes, such as the manufacture and supply of drugs.
One report led to a drug investigation in Auckland, where two people were arrested and charged with possession and supply of cannabis and methamphetamine, and with importing pseudoephedrine. The proceeds from the crimes were being exchanged with China.
Another Aucklander was arrested and charged with fraud and money laundering after being found to be involved in a money scam. The alleged offenders are currently before the courts.
Their alleged offending involved 25 victims from around New Zealand, who were told there was more than $290 million in an overseas bank account which could be unlocked only if fees were paid. The suspect promised to repay the victims their "investment" plus an additional return once the money was released. Kai Fong said the accused allegedly got their hands on at least $1m from New Zealand victims over the last two years.
A report which evaluated New Zealand's financial investigation channels was released at the end of last year by the Financial Action Task Force, an inter-governmental body which aims to combat money laundering and terrorist financing. It said there was a "higher degree of sophistication in laundering the proceeds of crime now than in previous years".
The report said that, between 2004-08, three-quarters of the financial crime investigated by police related to fraud-associated activity (mainly internet-banking fraud). Drug-related activity was the second-most investigated offence and robbery, theft, blackmail, and burglary were also common.
- © Fairfax NZ News BY SARAH HARVEY
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