Fraud Results Shock Delegates

The results of the Moore Stephens investigation into dealership fraud revealed fascinating insights into how and why staff are scamming dealerships.

96 percent of fraud takes place within the walls of the dealership business and 87 percent of perpetrators are male, according to the automotive fraud survey results revealed at this year’s Convention.

In a thought-provoking presentation by Moore Stephens Partners John Gavljak and Rami Eltchelebi, delegates were guided through detailed data highlighting the significant price of fraud to dealerships and what they can do to minimise risk.

Both Gavljak and Eltchelebi were quick to point out that while Dealers should always seek their own advice specific to their circumstances, the data gathered was a positive step forward in creating awareness, not to mention the first and only automotive-specific fraud survey conducted to date.

Before revealing their findings, Gavljak and Eltchelebi explained the concept of fraud, defining it as ‘a dishonest and deliberate course of action that results in obtaining of money, property, or an advantage.’ It was also referred to as ‘intentional, misleading or deceitful conduct that deprives [an] organisation of its resources or rights.’

So why do people, particularly staff, commit fraud?

According to Gavljak and Eltchelebi, three traditional factors are usually present when fraud occurs.

These are motivation – the need or greed of the perpetrator, opportunity – poor controls and vulnerabilities in the business and rationalisation – when fraudsters deem their actions as necessary, harmless or justified.

Globally, it was reported that the typical organisation loses 5% of its revenue to fraud every year, with average cases lasting 18 months before being detected. What’s more, most occupational fraudsters are first-time offenders with clean employment histories and nearly half of victim organisations do not recover their losses.

Turning to Australian statistics, there has been an 82% increase in individual frauds exceeding $1 million – and 47% of major frauds occur due to inefficient internal controls. Perhaps most concerning in Australia is that most fraudsters are earning close to $100k and are motivated by greed/lifestyle or personal financial pressure.

Fraud Prevention

Aside from reporting many of the real and less-than-appealing facts about fraud in dealerships and other Australian businesses, Gavljak and Eltchelebi also provided a number of useful methods to prevent and uncover illicit behaviour.
They first helped delegates identify ‘red flags’ in staff behaviours. Some examples included staff who don’t like people reviewing their work, live beyond their means, form close relationships with customers or vendors and work excessive overtime.

The presentation also examined ways to minimise fraud through ongoing anti-fraud training, carrying out risk assessments, introducing strong anti-fraud controls, random internal auditing, anonymous employee moral surveys and more.
In its conclusion, the presentation noted that while there’s a high probability that fraud exists in your business, strong internal controls and strategies are the most effective way to prevent trouble.
Indeed, dealerships should always strive to set an honest, transparent and ethical tone, but like many other businesses – it has to start at the top.

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