We're number 4!
Canada a fraud nation?Canada 4th in survey of global fraud
Karen Mazurkewich, Financial Post
Published: Tuesday, November 24, 2009
Alleged Canadian Ponzi schemers Gary Sorenson, left, and Earl Jones. (Gavin Young/Canwest News Service and Reuters/Shaun Best)
Karen Marie Fernets is a serial embezzler who bilked thousands of dollars from several employers in Saskatchewan, Alberta and the Yukon. Last month, Fernets was sentenced for theft and fraud charges dating back to 2005. Compared with other recent economic crimes, her tactics were unsophisticated -- she made a series of cheques payable to her own bank account.
This has been the year of white-collar scandals and schemes in Canada, ranging from disgraced Montreal financial advisor Earl Jones, charged with having spent at least $12-million of his clients' money, to Ponzi schemes run by Toronto fund manager Weizhen Tang, who allegedly ran a $60-million fraud, and the duo from Alberta -- Milowe Allen Brost and accomplice Gary Allen Sorenson -- who have been charged with embezelling roughly $100-million from unwitting investors.
Now a recent report by PricewaterhouseCoopers suggests Canadian companies make great targets for fraud. In their latest global economic crime survey, Canada was the fourth most fraudulent nation in the world -- behind Russia, South Africa and Kenya. (emphasis ours)
In its survey of more than 3,000 companies in 54 countries, 56% Canadian companies reported economic crimes over the past year. That's a 10% increase since 2003, the highest level in six years.
So does Canada have more thieves in our midst, or are we just better at ferreting out perpetrators?
The study suggests there is a bit of both. Tipoffs from internal or external sources are higher in Canada than in other countries, as is our ability to detect fraud through electronic means. Automated systems used to detect inconsistencies or suspicious transactions accounted for more than 10% of frauds detected by companies in Canada. Thanks to rats and routers, more crimes are being reported in Canada then elsewhere.
By contrast, the PwC report argues that the overall decrease since 2003 in reported crimes elsewhere in the world does not necessarily speak to their better anti-crime fighting abilities, but rather to an "overall breakdown in anti-fraud regime controls which would usually assist in the detection of economic crime."
"In Canada and around the world, respondents to the survey have indicated that the extreme conditions of the past year have contributed to an increase in both the motivation and the opportunity to commit fraud," said Pierre Taillefer of PwC in Montreal, one of the authors of the report.
"Certainly, when the liquidity of the market dried up, the Ponzi schemes got found out," said James Grout, partner at the Toronto-based Thornton Grout Finnigan. He has worked on a number of large white-collar crimes, including representing the receiver on the $800-million Portus Alternative Asset Management scandal.
Broadly defined, economic crime can encompass everything from bribery, embezzlement and manipulating financial statements to the theft of pencils from the office storeroom.
The most common type of fraud encountered in Canada is asset misappropriation, although accounting fraud and money laundering are also prevalent. Canada has a better track record when it comes to other types of economic crime. Whereas 27% of global respondents reported be a victim of bribery and corruption, only 7% of Canadian respondents experienced such crimes. In addition, while intellectual property infringement made up 15% of global complaints, only 7% of Canadian firms claimed such incidents.
"We're not as bad as many [developing] countries, but if you look around the OECD, the really developed economies with strong democratic governments, I think we are pretty high on the list for having a high incidence of commercial fraud," says Mr. Grout. He says the reason for that is the lack of deterrents. "We don't put anyone in jail," he said.
But that is starting to change. "In the last four years, I've noticed that the commissions are moving faster," he added.
Financial Post
kmazurkewich@nationalpost.com
This has been the year of white-collar scandals and schemes in Canada, ranging from disgraced Montreal financial advisor Earl Jones, charged with having spent at least $12-million of his clients' money, to Ponzi schemes run by Toronto fund manager Weizhen Tang, who allegedly ran a $60-million fraud, and the duo from Alberta -- Milowe Allen Brost and accomplice Gary Allen Sorenson -- who have been charged with embezelling roughly $100-million from unwitting investors.
Now a recent report by PricewaterhouseCoopers suggests Canadian companies make great targets for fraud. In their latest global economic crime survey, Canada was the fourth most fraudulent nation in the world -- behind Russia, South Africa and Kenya. (emphasis ours)
In its survey of more than 3,000 companies in 54 countries, 56% Canadian companies reported economic crimes over the past year. That's a 10% increase since 2003, the highest level in six years.
So does Canada have more thieves in our midst, or are we just better at ferreting out perpetrators?
The study suggests there is a bit of both. Tipoffs from internal or external sources are higher in Canada than in other countries, as is our ability to detect fraud through electronic means. Automated systems used to detect inconsistencies or suspicious transactions accounted for more than 10% of frauds detected by companies in Canada. Thanks to rats and routers, more crimes are being reported in Canada then elsewhere.
By contrast, the PwC report argues that the overall decrease since 2003 in reported crimes elsewhere in the world does not necessarily speak to their better anti-crime fighting abilities, but rather to an "overall breakdown in anti-fraud regime controls which would usually assist in the detection of economic crime."
"In Canada and around the world, respondents to the survey have indicated that the extreme conditions of the past year have contributed to an increase in both the motivation and the opportunity to commit fraud," said Pierre Taillefer of PwC in Montreal, one of the authors of the report.
"Certainly, when the liquidity of the market dried up, the Ponzi schemes got found out," said James Grout, partner at the Toronto-based Thornton Grout Finnigan. He has worked on a number of large white-collar crimes, including representing the receiver on the $800-million Portus Alternative Asset Management scandal.
Broadly defined, economic crime can encompass everything from bribery, embezzlement and manipulating financial statements to the theft of pencils from the office storeroom.
The most common type of fraud encountered in Canada is asset misappropriation, although accounting fraud and money laundering are also prevalent. Canada has a better track record when it comes to other types of economic crime. Whereas 27% of global respondents reported be a victim of bribery and corruption, only 7% of Canadian respondents experienced such crimes. In addition, while intellectual property infringement made up 15% of global complaints, only 7% of Canadian firms claimed such incidents.
"We're not as bad as many [developing] countries, but if you look around the OECD, the really developed economies with strong democratic governments, I think we are pretty high on the list for having a high incidence of commercial fraud," says Mr. Grout. He says the reason for that is the lack of deterrents. "We don't put anyone in jail," he said.
But that is starting to change. "In the last four years, I've noticed that the commissions are moving faster," he added.
Financial Post
kmazurkewich@nationalpost.com
posted by Clare L. Pieuk at 9:02 AM
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