Behind closed doors: the rising threat of internal fraud in Asia Pacific

Tuesday, 26 August 2025

As organisations across Asia Pacific navigate economic uncertainty, rapid digitisation and hybrid workforces, one persistent threat continues to quietly erode trust, finances and reputation from within.

Internal fraud is often hidden in plain sight. It is slow-moving, difficult to detect and frequently enabled by outdated controls or a complacent workplace culture. The cost isn’t just financial. It’s reputational and cultural, impacting organisational confidence, employee morale and public trust.
 

The hidden cost of looking away

Internal fraud takes many forms. From payroll manipulation and procurement kickbacks to ghost employees and inventory theft, its impact is often severe. In one example, staff siphoned $1.1 million over three years before a routine audit revealed the losses. In another, collusion between warehouse and sales teams led to $540,000 in missing inventory.
 
The financial damage is clear, but the deeper issue lies in the systemic weaknesses that allow these schemes to flourish - poor segregation of duties, minimal oversight, outdated systems and at times, a culture of silence. These issues are not confined to one country. Whether it’s fictitious billing in a Singaporean hospital, procurement fraud in an Australian council or misuse of research funds in a Malaysian university, the patterns are familiar. The specifics may vary, but the risks are widespread across the region.
 

Why it matters more than ever

Today’s risk landscape is shifting rapidly. Remote work, decentralised teams and the rise of AI-generated documents and deepfakes are giving internal fraudsters more tools and more cover. Many organisations are still relying on outdated controls or sporadic audits, leaving them exposed to modern forms of deception.
 
Internal fraud is no longer just a compliance issue. It is a strategic risk. If ignored, it can erode trust across the business, damage leadership credibility, impact employee retention and cause long-term reputational harm.
 

The red flags you’re probably missing

The signs of internal fraud are often subtle and easy to dismiss. Employees who never take leave, live beyond their means or frequently override controls may raise concerns. So too can unusual transactions or changes in behaviour.
 
But identifying red flags is only part of the solution. Real prevention means understanding the root causes - pressure, opportunity and rationalisation - and addressing them through culture, controls and accountability.
 

What should businesses be doing right now

A strong anti-fraud posture requires a layered and practical approach.

1. Strengthen internal controls: That means enforcing segregation of duties, implementing digital approval workflows and validating vendors rigorously. These are foundational measures, but too often overlooked or inconsistently applied.

2. Leverage technology: Artificial intelligence can help detect anomalies in real time. Blockchain solutions provide transparent audit trails. And natural language processing tools can scan large volumes of documents more effectively than manual review ever could.

3. Promote ethical culture: Leaders must set the tone by encouraging transparency, acknowledging challenges and rewarding ethical behaviour — not just outcomes. Ethics shouldn’t live in a policy document. They should show up in daily decisions.

4. Empower whistleblowers: Organisations that create anonymous, safe reporting channels and enforce anti-retaliation policies are far more likely to catch issues early.

5. Conduct regular, unannounced audits: Fraudsters are counting on predictability. Surprise checks, paired with data analytics, are powerful deterrents.

One region, many risk profiles

Asia Pacific is not a monolith. Internal fraud risks vary greatly between countries and industries, for example in the education sector, ghost students and misused research funds are common. While Government entities are more vulnerable to procurement and grant fraud and in healthcare, fictitious billing and conflicts of interest frequently surface.
 
There is no one-size-fits-all approach. Each organisation must tailor its prevention strategy to local regulations, industry-specific vulnerabilities and cultural dynamics.
 

Looking ahead: from back office to boardroom

Internal fraud is becoming more sophisticated, more digital and more damaging. Traditional detection methods are struggling to keep up. This is no longer just a concern for the compliance team. It belongs in the boardroom.
 
The question is not if fraud is happening, but whether your organisation is equipped to detect it, stop it and learn from it.

If your organisation hasn’t revisited its internal fraud controls recently, now is the time. Start by asking:

• Are our systems robust enough for today’s risks?

• Do we have visibility across key risk areas?

• Is our culture helping or hindering fraud prevention?

Because when fraud happens behind closed doors, the consequences don’t not stay there.