What is fraud?

A fraud offence is usually defined by four elements. There is dishonesty or deception: a false representation, concealment of material facts or manipulation of records. The misrepresentation is material, meaning significant enough to influence a decision, such as stated income or the value of security. There is intent to gain or to cause loss, which reckless mistakes typically do not meet. And the deceptive act caused, or could reasonably cause, a financial loss or wrongful gain.

Those elements separate deliberate fraud from bookkeeping errors, system faults or regulatory breaches that lack dishonest intent. Both need fixing, but fraud brings a legal and disciplinary response as well as a process fix.

Identity fraud uses stolen or synthetic identities to open accounts or take over existing ones. Application fraud involves false income, employment or asset claims on loan or lease applications, and is common in consumer car loans, asset-backed finance and small business lending. Loan stacking is applying across several lenders at once to borrow beyond repayment capacity. Payment fraud covers card-not-present scams, counterfeit cards, authorised push payment scams and manipulated direct debit instructions.

Invoice and supplier fraud diverts payments through false invoicing or business email compromise. Internal fraud includes payroll and expense manipulation, embezzlement and staff colluding with third parties, and is often the most costly over time because of privileged access. Cyber-enabled fraud overlaps with all of these, and money laundering is frequently the next step once the gain has been made.

Warning signs on applications include multiple applications from the same IP address or device under different names, employment or income details that cannot be verified, and contact details changed shortly before an urgent payment request. Transactional signs include sudden large transfers out of character for the account, rapid in-and-out movements, and repeated small test payments to one beneficiary. One flag may be benign; several together warrant a closer look.

Prevention is layered across people, process and technology: segregation of duties, dual authorisation for high-value payments and changes to supplier bank details, identity verification with document and liveness checks, bureau and watchlist screening, daily reconciliation, and a whistleblower channel. Suspected fraud is contained first (freeze accounts, stop payments), evidence is preserved, then it is reported to your state or territory police, through ReportCyber where the fraud was cyber-enabled, to AUSTRAC where a reporting entity suspects money laundering, and to ASIC for serious incidents. The Australian Federal Police investigates Commonwealth offences.