Australian Institute of Criminology

Skip to content

How fraud was committed

The ways in which fraud can be committed are only limited by one’s imagination, with methods varying from the simple and obvious to the sophisticated and obscure. This variation creates difficulties for conducting research, as it is not always possible to categorise individual incidents uniformly and discretely. In order to provide a clear set of categories to describe how fraud against the Commonwealth was undertaken, respondents were asked to indicate two main aspects of how the fraud incidents they detected had been committed—their ‘focus’ (the target of the alleged fraudulent activity, or the benefit to be derived from the suspected illegal conduct) and the ‘method’ used to carry out the alleged activity (such as misuse of technology, information, identity etc).

Five categories of focus were examined—equipment (such as computers or stock), entitlements (such as travel and expense claims), information (such as misuse of intellectual property or other information), financial benefits (such as misuse of petty cash or credit cards in the case of internal fraud, or welfare fraud in the case of external fraud) and other types (used for any incidents relating to a focus that did not fall into one of the 4 specified categories). Because fraud incidents could entail more than one type of focus, respondents were at liberty to provide multiple types of focus for each incident if appropriate. This meant that the focus totals exceeded the number of separate incidents.

Respondents were also asked to choose from among four methods by which the incidents took place—misuse of ICT, misuse of identity, misuse of documents or information and acts of corruption (such as paying or accepting bribes or kickbacks). In addition, a further ‘other’ option was provided for other unspecified methods. As was the case with the focus questions, respondents were also able to provide multiple responses for each fraud incident.

Aggregate data on both the focus of fraud and methods used in terms of the number of agencies and number of incidents are provided in Appendix A. For the purposes of the present discussion, select results are presented in respect of internal fraud incidents and then for external fraud.

Internal fraud

Focus

The largest number of entities reported suspected internal fraud incidents involving financial benefits (such as obtaining cash without permission, misuse of government credit cards etc) with almost one-quarter of respondents reporting this type of internal fraud incident each year (see Figure 5). There was an increase in the proportion of entities reporting entitlement fraud (such as those associated with payroll and expenses etc), while the proportion reporting fraud associated with information (such as obtaining or using information without permission) declined over the period.

Figure 5 Internal fraud focus categories and entities affected, 2010–11 to 2012–13 (%)

mr24_figure05.ai

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

In terms of number of incidents, all categories of internal fraud focus decreased over the three years, with the largest decrease of 75 percent being reported in respect of the ‘other’ fraud focus category, followed by a 64 percent decline in fraud involving information (see Figure 6). More than 80 percent of information-related internal fraud incidents in each of the three years were concerned with obtaining or using personal information without authorisation. The second most frequently reported focus of internal fraud incidents in each year related to financial benefits, which decreased by 24 percent over the three years, from 522 incidents in 2010–11, to 397 incidents in 2012–13 see (see Figure 6).

Figure 6 Internal fraud focus categories and alleged incidents, 2010–11 to 2012–13 (N)

mr24_figure06.ai

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

As indicated in Figure 7, there was no discernible pattern in the types of financial benefit being defrauded. Although misuse or theft of government credit cards, travel cards or other cash cards was prevalent each year, it declined by 32 percent between 2010-11 and 2012-13. The extent of payment card-related fraud is clearly related to the increasing use of such cards, although risk awareness and enhanced controls may have led to a decline in its incidence. Some of the large increases or decreases reported for categories such as ‘obtaining cash / currency without permission’, ‘falsification of documents in order to gain financial benefits’, and ‘other financial benefits’ were due to suspected fraud incidents being reported by two entities that dealt with transactions involving risks of this nature. Such fluctuations are, however, not unusual and have occurred in many entities over time as they detect and respond to emerging new fraud risks.

Figure 7 Internal fraud involving financial benefits subcategories and alleged incidents, 2010–11 to 2012–13 (N)

mr24_figure07.ai

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

Method

In relation to the methods by which internal fraud incidents had allegedly been committed, a decrease was found in the percentage of entities reporting misuse of ICT, corruption and ‘other’ types of method, while misuse of identity and documents increased over the three years (see Figure 8). In terms of the number of internal fraud incidents, however, the trends were different. Over the three years, the number of incidents of internal fraud committed by misuse of ICT and ‘other’ methods declined, while the number of incidents of misuse of identity and corruption increased. In 2010–11, one respondent reported an unusually large number of incidents of internal fraud involving ‘other’ methods of various types, mainly relating to theft of petty cash or misuse of Cabcharge cards. In the case of corruption, the proportion of entities reporting corruption as a method decreased from 19 percent of entities in 2010–11 to 12 percent in 2012–13 (see Figure 8) and there was a corresponding increase in the number of incidents of internal fraud involving corruption, which increased by 71 percent, from 203 incidents in 2010–11 to 364 in 2012–13 (see Figure 9).

The number of incidents of misuse of documents fluctuated slightly over the three years. In each year, the method of committing internal fraud that was most prevalent involved ‘accessing information or programs via a computer without authorisation’, although this showed a decline over time (see Table 6).

Figure 8 Internal fraud method categories and entities affected, 2010–11 to 2012–13 (%)

mr24_figure08.ai

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

Figure 9 Internal fraud method categories and alleged incidents, 2010–11 to 2012–13 (N)

mr24_figure09.ai

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

Table 6 Internal fraud committed via misuse of ICT by alleged incident, 2010–11 to 2012–13 (N)
Misuse of ICT Year
2010–11 2011–12 2012–13
Accessing information or programs via a computer without authorisation 991 964 612
Copying or altering data or programs without authorisation 18 14 26
Misuse of email 57 23 25
Manipulation of a computerised accounting system n.p. 32 24
Insertion of malicious code 0 0 2
Interference with computer networks 0 0 0
Unable to be determined 1 3 3
Other misuse of IT 51 28 6

n.p. - category not provided

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

External fraud

Focus

Fraud involving financial benefits was the most frequently reported category of external fraud over the three years (and reflects earlier findings eg Lindley, Jorna & Smith 2012), with the proportion of entities experiencing such frauds increasing from 18 percent in 2010–11 to 21 percent in 2012–13. The next most prevalent focus of external fraud was information-related, which affected 19 percent of entities in 2010–11, declining to 14 percent of entities in 2011–12 and 2012–13 (see Figure 10).

Figure 10 External fraud focus categories and entities affected, 2010–11 to 2012–13 (%)

mr24_figure10.ai

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

In terms of reported incidents of external fraud, however, the vast majority involved fraud relating to government entitlements with a large increase from 52,127 incidents in 2010–11 to 170,756 incidents in 2011–12, followed by a decline to 90,773 incidents in 2012–13 (see Figure 11). The substantial variation over these three years was due to changes in reporting by one large entity. Entitlement fraud most often involved three main types—revenue fraud visa and citizenship fraud, and social security fraud arising from the three large service provider entities (see Table 7).

Figure 11 External fraud focus categories and alleged incidents, 2010–11 to 2012–13 (N)

mr24_figure11.ai

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

Table 7 Entitlement fraud subcategories and alleged incidents, 2010–11 to 2012–13 (N)
2010–11 2011–12 2012–13
Entitlements relating to housing 1 4 0
Social security fraud 22240 71925 3254
Health benefit fraud 2095 977 390
Visa or citizenship fraud 27394 28229 28142
Child support entitlement fraud 1 199 232
Revenue fraud 169 69081 58364
Customs and Excise fraud 20 230 299
Unable to be determined 1 0 13
Other entitlements 206 111 79

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

Method

In terms of the methods of committing external fraud, the largest percentage of entities reported experiencing misuse of documents, while only five percent of entities reported corruption in 2011–12 and 2012–13. There was a large reduction in the category of ‘other’ methods of committing external fraud from 14 percent of entities in 2010–11 to seven percent in 2012–13. Misuse of ICT also declined with eight percent of entities affected in 2010–11 to only five percent in 2012–13 (see Figure 12).

Figure 12 External fraud method categories and entities affected, 2010–11 to 2012–13 (%)

mr24_figure12.ai

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]

In terms of the number of alleged incidents, however, over the three years the number of external fraud-related corruption incidents increased substantially from a low baseline of 37 in 2010–11 to 163 in 2012–13. By way of contrast, the number of incidents of fraud involving misuse of ICT declined from 56 in 2010–11 to 19 in 2012–13. In relation to fraud involving misuse of identity, both the proportion of entities affected and the number of incidents remained relatively stable over the three years. By far the most prevalent categories of external fraud methods were misuse of documents and ‘other’ types (see Figure 13). The large numbers of ‘other’ methods of external fraud were reported by two large service provider entities in 2011–12. Although in the case of many of these matters, the precise method of fraud was unable to be determined, large numbers appeared to involve the overpayment of benefits and false statements concerning information that members of the public provided to entities.

Figure 13 External fraud method categories and alleged incidents, 2010–11 to 2012–13 (N)

mr24_figure13.ai

Source: Commonwealth fraud surveys 2010–11, 2011–12 and 2012–13 [AIC computer file]