Financial services industry braces for damning fraud report

Fraudin financial services will come under close scrutiny next month when a hard hitting and potentially damaging report is released.

The report — Protecting Retail Investor Savings (PRIS) — follows eight months of investigation and analysis of incidences of fraud in the industry and was compiled with feedback from more than 25 dealer groups responsible for 6,000 representatives.

According to preliminary findings released by Tepana Associates director Kathleen Tepana, who conducted the study along with former Macquarie Adviser Services head Tim Farrelly and BNP Paribas Securities Services Australasia head Gail Burke, there have been close to 200 fraud convictions in the industry over the past six years.

However, Tepana says two other types of fraud, namely undetected fraud and fraud which is known only to a few people (ie. detected but not reported for fear of brand damage) need to be tackled by the industry.

“There is recognition across the whole industry including adviser groups, fund managers, regulators and associations that all have a role to play in addressing the problem of fraud.”

The statistics relating to other incidences of misappropriation taking place across financial services will be released along with the report itself in late September.

Tepana, who spent seven years as a market researcher withAssirt, says the key objective of the Macquarie sponsored survey is to understand the extent of fraud in the industry and how it can be minimised.

“This study is the first step in understanding how and why fraud occurs and what we can do to combat the problem,” she says.

The number of convictions were calculated using theAustralian Securities and Investments Commission’s database.

“The report will result in recommendations for what the dealers can do to help prevent fraud, as well as what the consumer, the product providers, the industry associations and the regulators can do to help minimise fraud,” Tepana says.