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#Anti Money Laundering

Fraud in Switzerland - an update on high profile fraud related stories

International Compliance Association

fraud , Switzerland

We don’t know who originally had the idea for committing financial crime, although what is said to be the first recorded incident of fraud – involving a Greek merchant called Hegestratos, an upfront payment for transporting a cargo of corn and a failed plan to scuttle the ship carrying it – dates back to around 300 BC.

Things have become a bit more sophisticated since then, not least because of new technology and the scope it offers for cyber-enabled fraud. Research published earlier this year by KPMG found that technology was a key enabler for almost a quarter of fraudsters and cyber-enabled fraud was ‘emerging as a growing threat’.

But whatever tools are used – from a multi-million dollar email scam to the old-fashioned technique of bouncing cheques – and whatever the fraudster’s motives for committing fraud may be, the threat to individuals and organisations is ever-present and the issue is rarely out of the headlines, in Switzerland or around the world.

Credit card data

A quick Internet trawl produces a string of recent high-profile fraud-related stories. Only days ago, the Office of the Attorney General in Switzerland announced that three people arrested in Bangkok had been charged with computer fraud for commercial gain relating to the fraudulent use of credit card data, beginning in 2008.

The case is a ground-breaking one: it is the first in Switzerland where ‘an indictment has been filed against accused engaged in criminal activity on a global scale who were not physically present in Switzerland.’

Globally, the UK Serious Fraud Office (SFO) announced on 8 August that it had opened a criminal investigation into global civil aviation giant Airbus Group ‘into allegations of fraud, bribery and corruption…[that] relate to irregularities concerning third party consultants’. Airbus says it ‘continues to cooperate with the SFO’.

Card not present fraud in Australia was reported to have shot up by 13% to AUS$226.3 million in 2015, Egypt is caught up in a wheat procurement scandal and the death has been announced of Lou Pearlman. Famous as the man behind boy bands Backstreet Boys and NSYNC, he was serving a 25-year jail sentence for a £300 million Ponzi fraud when he died.

The picture in Switzerland

Let’s go back to the Switzerland, and take a closer look at the fraud landscape there. Figures from the Swiss Federal Statistical Office, using its useful search facility, suggest fraud generally is at a fairly low level; in 2016, there were just over 8,000 fraud incidents, including minor offences, with other fraud typologies – including advance payment fraud, insurance fraud and currency exchange fraud – in the hundreds. The number of computer frauds, however, stood at 4,370, slightly up on the previous year.

However, research by KPMG from earlier this year tracking the largest fraud cases in Switzerland – those involving convictions and publicised – identified 91 in 2015, the largest number since KPMG began measuring these incidents back in 2008.

They also involved a whopping CHF280 million in financial losses, although the average loss, when adjusted for a couple of extremely large cases, was actually down on 2104. KPMG suggests this could be down to Swiss organisations being better at detecting fraud earlier on, so cutting their losses.

Money laundering

Elsewhere, the Annual Report by the Money Laundering Reporting Office Switzerland MROS, published in April this year, contained some interesting fraud-related findings. Fraud had been the most frequently reported suspected predicate offence in suspicious activity reports (SARs) since 2006, but was knocked into second place by bribery in 2015: bribery accounted for 595 reports and fraud 447. However, that fraud figure is more than double what it was in 2006 and has remained pretty consistently at around the 450 level since 2010.

The report also highlighted a record number of cases involving the fraudulent misuse of a computer, particularly phishing, which leapt by 37% on the previous report, with virtually all these coming from the banking sector. Just to put that into context, in 2006, there was not a single SAR involving fraudulent misuse of a computer and incidents remained in the low double figures until 2012.

A number of case studies in the report explore a range of fraud typologies. These included art dealing, with transactions featuring a painting said to be Marc Chagall, the use of falsified airline tickets, a pyramid scheme involving an online gambling platform and an Internet-based scam, in which hundreds of people ‘bought into what turned out to be a non-existing timesharing deal’.  

Fraud and business

What about wider fraud in the business world? According to a 2015 EY fraud survey: ‘High-profile cases of financial misstatement and criminal investigations into accounting regularities do not appear to have resulted in any reduction in the risks of fraud…the risks of fraud, bribery and corruption are not going away’.

And it had a stark warning that in a highly competitive marketplace, ‘growth through corruption or fraud may seem the quickest option’.

However, there were some positive findings from Switzerland in the report, which questioned employees in large companies in 38 countries in Europe, the Middle East, India and Africa: when it came to perceptions about whether bribery/corrupt practices happen widely in their country, only 12% of Swiss respondents thought that was the case, way below the 51% average for all countries.

And when asked whether they had heard of fraud or bribery in their business over the last 12 months, just 11% of Swiss respondents said yes, compared with an all-country average of 21% and a high of 99% in Oman.

Combating fraud

If fraud has been around since 300BC, it’s a fair chance it will still be with us in 2300 or even 3300: it will just have evolved alongside the ways we live and work and the technology we use. But with some stark warnings about the cost of cyber-enabled fraud and other cybercrime alone – predicted to hit $2.1 trillion globally by 2019 – organisations cannot afford to leave fraud risks out of their strategic planning. Developing an anti-fraud culture, to protect against fraud happening in the first place, and fraud response plans, in the event that it does, are crucial.

We’ve recognised the importance of fraud risk management with the ICA Advanced Certificate in Managing Fraud, an intermediate level course aimed at current practitioners and those new to the field, which focuses on understanding fraud threats, preventing them from occurring and managing the response when they do. 

For more information on the full range of ICA qualifications in Switzerland, please visit our qualifications page.

To stay updated on the latest regulatory and financial crime compliance developments in Switzerland, please follow us on LinkedInFacebookand Twitter, where you are guaranteed to be notified when our next blog post goes live.


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