When someone is asked to describe 'collusion', a typical
response may involve a scenario where firms are working together to
fix the price of a product across a market. But the risk of
collusion internally or with suppliers should be on the radar for
The 2016 Report to the Nations of the Association of Certified
Fraud Examiners ('ACFE') shows that collusion occurs almost
as frequently as fraud is committed by a single employee; and that,
on average, the more people involved, the bigger the financial
The good news? While collusion is a real risk, there are things
that you can do to help prevent or detect it. There are some
solutions that are relatively easy and cost-effective.
2 What is collusion?
Collusion is a secret agreement or cooperation between parties
for illegal or deceitful purpose. It can come in different forms,
including bribery and corruption, or fraud. The risks to an
organisation can originate from internal or external sources, or a
combination of both.
Here are two simplistic examples showing how external and
internal parties can collude to defraud an organisation.
3 Real-life collusion
The story of Dr Esra Ogru 1 is a real-life example of
Dr Ogru was the co-CEO of an Australian biotech company. She
colluded with two colleagues to defraud her employer of more than
$6.1 million between 2004 and 2013. This was done through false
invoicing and credit card reimbursements.
Dr Ogru and her colleagues were in positions of authority which
allowed them to approve false invoices from entities that they
controlled. As co-CEO, Dr Ogru knew the amount to invoice without
raising suspicion and was able to approve the invoices. The money
received was then divided between the three individuals.
The scheme was finally detected by the CFO who started
questioning invoices from one of the entities. Her concerns were
raised with the audit committee and investigations were
When the case ended, the other co-CEO acknowledged that
"the company' s internal checks and balances should have
been better." 2
4 How serious is collusion?
ACFE's 2016 Report to the Nations shows that:
Nearly half of reported fraud cases involve collusion.
As the number of people involved gets higher, so does the
When the number of perpetrators increases from just one to two,
the average loss rises nearly two-fold.
When the number of people increase from four to five (or more),
the average loss rises by more than two fold.
More cases involve five or more people than either three or
5 What can you do to combat procurement collusion?
Relevant to procurement, there are two approaches: preventive
and detective, as set out below:
In the examples set out earlier, the risk of collusion could
have been reduced:
The external collusion scenario – by conducting a strict
tender review process or due diligence on the supplier.
The internal collusion scenario – by conducting due
diligence on the suppliers, with a review committee approving new
The real-life example of Dr Ogru – by conducting a due
diligence on the suppliers recorded and stringent regular checks on
supplier invoices and employee credit card claims.
The repercussions of collusion can be significant, not only to a
business' s operations, but also to its reputation. Tightening
internal controls will mitigate the possibility of collusion.
An employee guilty of collusion is typically in a position of
trust or authority , which helps in defrauding the employer. The
steps outlined above can be implemented without undermining that
trust, but reduce the risk and impact of collusion.
In our experience, no single policy or control works in every
organisation, but the principles are universal.
This is the first charge against a corporation under the criminal cartel provisions of the Competition and Consumer Act.
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