Which Canadians are the most likely fraudsters?

New report from MNP finds it may not be those you would expect

Which Canadians are the most likely fraudsters?
Steve Randall

Investors are frequently targeted by fraudsters, whether through investment scams or wider financially-motivated frauds such as phishing attacks.

But when considering Canada’s largest frauds, do fraudsters fit a typical profile?

Yes, according to a new report from advisory and accounting firm MNP which has analyzed details from hundreds of prosecuted fraud cases involving at least $5,000.

Between 2012 and 2018, the largest frauds in Canada were committed by those aged 65 and older, often those holding trusted positions near the top of the corporate ladder.

Men were twice as likely as women to be named fraudsters and stole four times as much as female counterparts.

Perhaps most surprising is that 16% of those fraudsters in a position of trust had done it before, something a simple background check could have revealed.

“Organizations that fail to properly screen company leaders could be bilked out of millions of dollars,” warns Greg Draper, Vice President of Valuations, Forensics and Litigation Support at MNP LLP and former RCMP investigator.

Draper added that many organizations may be operating with a false sense of security.

“They may assume that employees in leadership positions or who have been around a long time are safeguarding the interests of the company when, in fact, these individuals are the most capable of committing fraud with the greatest potential loss,” he said.

What are their crimes?
The analysis shows that 73% per cent of Ponzi schemes were orchestrated by individuals aged 50 to 69.

Those over 50 almost committed half of cases involving fraudulent billing and inventory misappropriation, and 57% of cases of cash misappropriation were committed by this age group.

Payroll fraud, the theft of cash from a business via the payroll processing system, was the exception. This type of fraud was committed by individuals at every level of the organization with the number of cases split evenly within each age group.

“In a lot of cases the fraud has been committed by someone who is very well-liked and respected within the organization,” said Jeff Thomson, Acting Sergeant for the RCMP at the Canadian Anti-Fraud Centre (CAFC).

Thomson says organizations should not put total trust in just one person and he warns that the cost of fraudulent behaviour can be more than just a financial one.

“The crime is not only a financial burden for the organization, but there is a loss of workplace morale as well,” he said. “What’s worse is that it can be a very laborious effort to investigate and expensive to prosecute so businesses might try to sweep it under the rug and move on without much recourse.”

Trusted people get away with it longer
People in trusted positions appear to be able to continue their crimes undetected for longer, with most of the frauds analyzed for the study lasting around 3 years.

Older fraudsters also tend to steal larger amounts with a median of $400,000 across Canada taken by people in their 50s; and just under $800,000 stolen by those in their 70s.

“Where many companies fail is continued screening and scrutiny. Once trust is established, it’s common for certain internal controls to become more relaxed. Organizations need to establish a long-term and consistent commitment to fraud prevention at every level of the organization – including board members since they are the ones managing the most senior people,” advised Draper.