Noosa Council has suffered major ramifications after being conned out of $2.3 million in an elaborate AI scam. This fraud that has shocked their council members and outraged the public shines a bright light on the vulnerabilities through their day-to-day operational procedures. So far, scamming the Gold Coast City Council about a year ago resulted in a loss of $2.78 million. This sparks honest fears over safety between levels of government.
The internal investigation carried out by Noosa Council found that human error was a key factor in this incident. Council members Larry Sengstock and Frank Wilkie have publicly addressed the situation, underscoring the need for improved safeguards to prevent future occurrences.
Investigative Findings and Lessons Learned
The Inspector General’s report on the fraud incident described at least three “key lessons” which, if acted upon, would have averted the scam. These lessons have led Noosa Council to very fundamentally rethink its operational procedures. To address this, we rolled out new security awareness training courses to all employees. We have instituted additional verification steps for any change to supplier information.
The council introduced new formal oversight and required approval for any changes involving bank account information. This prevents any proposed changes from escaping without rigorous review. An audit trail is now automatically created for each payment to a supplier. We employ third-party payment protection software to further protect our finances.
“We are implementing all Queensland Audit Office recommendations,” – Mr Sengstock
Financial Recovery Efforts
In the aftermath of the fraud, Noosa Council has tried to mitigate losses through legal action. However, so far they have only been able to collect $200k total from insurance and an additional $440k from banking recovery processes. Despite these financial recoveries, the incident has caused irrevocable long-term impacts on council staff.
“Many of our staff continue to be impacted by this unfortunate incident,” Mr. Sengstock stated. He delivered a promise to protecting city employees through this rough patch while assuring that the council is on solid financial footing.
Changes in Governance and Compliance
In response to the fraud, Noosa Council has instated a “staff commitment to compliance” in its culture of operations. Mr. Sengstock admitted that many of the current processes weren’t even followed correctly. He argued that it would be “unfair to assign blame.” He added that the council underestimated the possibility that their process was not enough to prevent those risks.
“We thought we did have processes that would be able to combat all of this. But unfortunately, until you know, you don’t know,” Mr. Sengstock explained.
Deputy Mayor Brian Stockwell and former FMTC Frank Wilkie voted against releasing the scandal’s report, which details $1.7M in fraudulent transactions. Their rationale exposes a significant split on the council regarding the nature of transparency.
