Financial Crime World

Financial Crimes Devastate New Zealand Small Businesses

A Looming Threat to Small Business Owners

Recent research has shed light on the alarming consequences of financial crimes perpetrated against small businesses in New Zealand. A study conducted by academics from Massey University examined 12 court cases involving 14 small businesses that were victimized by their employees, revealing a pervasive issue affecting a wide range of small businesses.

The Perpetrators: Middle-Level Managers

  • Middle-level managers were found to be the primary perpetrators of financial crime.
  • They often funneled stolen funds into their personal accounts to “keep up appearances.”
  • This motive highlights the trust placed in employees by management, who often failed to conduct thorough background checks before hiring.

Consequences of Financial Crime

  • Losses ranged from $6,000 to $590,000.
  • One business was liquidated as a result of these crimes.
  • The study’s findings emphasize the importance of employee screening as a crucial first line of defense against financial crime in small businesses.

Vulnerabilities Exposed

The researchers identified several key factors contributing to the vulnerability of small businesses to financial crime, including:

Inadequate Internal Controls

Internal controls are essential for preventing and detecting financial crimes. Without adequate internal controls, small businesses are more susceptible to these types of crimes.

Lack of Awareness about Fraud Risk Severity

Many small business owners may underestimate the severity of fraud risk or fail to recognize warning signs. This lack of awareness can leave them unprepared to respond effectively when a financial crime occurs.

Protecting Your Business from Financial Crime

The study’s findings have significant implications for small business owners in New Zealand, who must take proactive steps to protect themselves against financial crimes. By prioritizing employee screening and implementing effective internal controls, businesses can reduce their vulnerability to financial crime and prevent devastating losses.