s with a virus, corruption is adaptable, pernicious, and has found the ideal conditions to flourish. Real estate fraud is on the rise in Africa, along with new illicit trade schemes in Southeast Asia and shady oil deals in the Middle East and Eurasia petrostates. In Iraq alone, one Parliament member estimates that corruption now swallows nearly 90% of national customs revenue, making it a top threat to the country’s stability. In Latin America, a former Ecuadorian president is among the high profile figures caught up in coronavirus corruption scandals involving large-scale theft of ventilators and other medical equipment from public hospitals. The elite in some countries are bribing their way into lucrative government contracts and out of quarantine situations. This endangers the health of others and further demonstrates the growing chasm between the haves and have nots.
There is growing concern that the speed and scale of COVID-19 response measures by many governments, especially those with unchecked emergency powers, are leaving countries more vulnerable than ever to new forms of corruption and fraud. This could keep lifesaving assistance and protection from those who need it the most, due to the exploitation of their evolving governance and procurement processes. With trillions of dollars pledged for coronavirus support worldwide, a significant amount of money may be lost if there is not adequate scrutiny. This makes it imperative that the international community and private sector actors push for transparency and controls to mitigate these risks.
The Pathology of Corruption
The sheer volume of money being mobilized due to COVID-19 may thwart good budgeting and expenditure controls within stretched governments. Additionally, as idled companies and dormant supply chains come back to life, there will be tremendous pressure to cut corners and restore cash flow. State-owned enterprises, which comprise 22% of the world’s largest companies, may be more susceptible to corruption. Law enforcement agencies and anti-corruption compliance officers may find themselves overwhelmed by demands to loosen oversight in the name of restoring the economy. Other related developments that threaten to undermine public trust: judicial oversight confusion, possible election delays, and political finance scams or shows of favoritism, according to the International Foundation of Electoral Systems.
Developing a vaccine for COVID-19 requires understanding the pathology of the virus and how it works. The same is true for fighting corruption. The most effective strategy comes about from reverse engineering the mechanisms of corruption, determining the method for interrupting their progress, and inoculating institutions against future possible infection. Testing, or oversight and monitoring in this case, is key to any successful approach. Meanwhile, the United Nation’s Sustainable Development Goals have spurred increased investment in technology and automation that can improve data for analysis, monitoring, and accountability.
Actions to catch the most common forms of corruption include the diligent review of government procurement contracts, public budgeting, and state-owned industry activity. Patterns can be very telling. Specific types of real estate and insurance transactions are also red flags that may indicate illegal activity, according to anti-money laundering experts. Non-government organizations and watchdog groups, such as Transparency International, may also play a role here.
Corruption Treatment Protocols
What are the treatment protocols we can prescribe for corruption in the COVID era? The pathology of the illness has been identified: large flows of public funds and goods are moving without oversight, government contracts are being steered to undeserving parties, and weakened firms are resorting to corruption as a survival strategy. The key to fighting the corruption pandemic is public and political will to continue the battle. In reducing corruption there is no substitute for good governance.
Governments and business must fast-track procurement in a transparent way that still upholds procurement and accounting best practices, including adherence to international standards and applicable local law. Public-private dialogue mechanisms, such as advisory boards and councils, can help shape laws and procedures that support healthy supply chains and keep revenue flowing. A concerted campaign by companies and government officials to underscore the need for business integrity and the risk of violating anti-corruption laws may be helpful in bolstering the resolve of compliance officers. This includes education initiatives at all levels covering legal requirements and company policies. It also requires whistleblower protections for those who report fraud or abuse.
Civil society and business organizations can offer guidance on what tools compliance officers can use to hold the line and help their companies maintain the integrity standards, such as the Ethics 1st certification program launched at the 2019 Africa Business Ethics Conference. Another tactic is enabling private sector groups that have local, on-the-ground knowledge of the operating environment to oversee the flow of aid and in-country procurement. In previous crises, in-country businesses have been uniquely positioned to report on abuses.
One example is Thailand’s Private Sector Collective Action Against Corruption Coalition, which comprises more than 1,000 companies. The coalition has become one of many touchstones in Southeast Asia for setting standards of business integrity and the creation of robust training modules, covering everything from cybersecurity issues to overall compliance and implementation of corruption risk matrices. Their core message is that ethical companies are better positioned to cope with the pandemic, can be trusted trading partners, and can credibly voice concerns to their governments to create a fairer and business enabling environment.
Authoritarian states may require a more aggressive form of treatment. Containment and isolation are often effective strategies. The international community can contain authoritarian corruption by clearly identifying and calling out egregious behavior.
Isolation—in the form of closing loopholes that allow kleptocrats to move their money to safe havens abroad—makes hiding these ill-gotten gains more difficult.
Embracing A Value-Driven Economy
As with fighting a pandemic, we should not just focus on the short-term battle to contain corruption, but also on the longer-term goal of a significant reduction in the disease. Intolerance is a key weapon and there is more of a stigma attached to corruption these days. Additionally, the technologies for fighting corruption have improved over the last decade. These innovations have afforded automated detection, fast access to big data for better analyses, and immediate sharing. Among the results: more prosecutions of corrupt public officials, the rise of a “compliance culture” in corporations, and networks of media and non-governmental organizations dedicated to the eradication of corruption. While these activities may not stop all corruption, they provide a disincentive. As the saying goes, sunshine is a powerful disinfectant.
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Corruption Is Like A Coronavirus
June 24, 2020
COVID-19 necessitates a speed and scale of response that provides bad-acting governments and officials with more avenues for corruption and fraud.
A
s with a virus, corruption is adaptable, pernicious, and has found the ideal conditions to flourish. Real estate fraud is on the rise in Africa, along with new illicit trade schemes in Southeast Asia and shady oil deals in the Middle East and Eurasia petrostates. In Iraq alone, one Parliament member estimates that corruption now swallows nearly 90% of national customs revenue, making it a top threat to the country’s stability. In Latin America, a former Ecuadorian president is among the high profile figures caught up in coronavirus corruption scandals involving large-scale theft of ventilators and other medical equipment from public hospitals. The elite in some countries are bribing their way into lucrative government contracts and out of quarantine situations. This endangers the health of others and further demonstrates the growing chasm between the haves and have nots.
There is growing concern that the speed and scale of COVID-19 response measures by many governments, especially those with unchecked emergency powers, are leaving countries more vulnerable than ever to new forms of corruption and fraud. This could keep lifesaving assistance and protection from those who need it the most, due to the exploitation of their evolving governance and procurement processes. With trillions of dollars pledged for coronavirus support worldwide, a significant amount of money may be lost if there is not adequate scrutiny. This makes it imperative that the international community and private sector actors push for transparency and controls to mitigate these risks.
The Pathology of Corruption
The sheer volume of money being mobilized due to COVID-19 may thwart good budgeting and expenditure controls within stretched governments. Additionally, as idled companies and dormant supply chains come back to life, there will be tremendous pressure to cut corners and restore cash flow. State-owned enterprises, which comprise 22% of the world’s largest companies, may be more susceptible to corruption. Law enforcement agencies and anti-corruption compliance officers may find themselves overwhelmed by demands to loosen oversight in the name of restoring the economy. Other related developments that threaten to undermine public trust: judicial oversight confusion, possible election delays, and political finance scams or shows of favoritism, according to the International Foundation of Electoral Systems.
Developing a vaccine for COVID-19 requires understanding the pathology of the virus and how it works. The same is true for fighting corruption. The most effective strategy comes about from reverse engineering the mechanisms of corruption, determining the method for interrupting their progress, and inoculating institutions against future possible infection. Testing, or oversight and monitoring in this case, is key to any successful approach. Meanwhile, the United Nation’s Sustainable Development Goals have spurred increased investment in technology and automation that can improve data for analysis, monitoring, and accountability.
Actions to catch the most common forms of corruption include the diligent review of government procurement contracts, public budgeting, and state-owned industry activity. Patterns can be very telling. Specific types of real estate and insurance transactions are also red flags that may indicate illegal activity, according to anti-money laundering experts. Non-government organizations and watchdog groups, such as Transparency International, may also play a role here.
Corruption Treatment Protocols
What are the treatment protocols we can prescribe for corruption in the COVID era? The pathology of the illness has been identified: large flows of public funds and goods are moving without oversight, government contracts are being steered to undeserving parties, and weakened firms are resorting to corruption as a survival strategy. The key to fighting the corruption pandemic is public and political will to continue the battle. In reducing corruption there is no substitute for good governance.
Governments and business must fast-track procurement in a transparent way that still upholds procurement and accounting best practices, including adherence to international standards and applicable local law. Public-private dialogue mechanisms, such as advisory boards and councils, can help shape laws and procedures that support healthy supply chains and keep revenue flowing. A concerted campaign by companies and government officials to underscore the need for business integrity and the risk of violating anti-corruption laws may be helpful in bolstering the resolve of compliance officers. This includes education initiatives at all levels covering legal requirements and company policies. It also requires whistleblower protections for those who report fraud or abuse.
Civil society and business organizations can offer guidance on what tools compliance officers can use to hold the line and help their companies maintain the integrity standards, such as the Ethics 1st certification program launched at the 2019 Africa Business Ethics Conference. Another tactic is enabling private sector groups that have local, on-the-ground knowledge of the operating environment to oversee the flow of aid and in-country procurement. In previous crises, in-country businesses have been uniquely positioned to report on abuses.
One example is Thailand’s Private Sector Collective Action Against Corruption Coalition, which comprises more than 1,000 companies. The coalition has become one of many touchstones in Southeast Asia for setting standards of business integrity and the creation of robust training modules, covering everything from cybersecurity issues to overall compliance and implementation of corruption risk matrices. Their core message is that ethical companies are better positioned to cope with the pandemic, can be trusted trading partners, and can credibly voice concerns to their governments to create a fairer and business enabling environment.
Authoritarian states may require a more aggressive form of treatment. Containment and isolation are often effective strategies. The international community can contain authoritarian corruption by clearly identifying and calling out egregious behavior.
Isolation—in the form of closing loopholes that allow kleptocrats to move their money to safe havens abroad—makes hiding these ill-gotten gains more difficult.
Embracing A Value-Driven Economy
As with fighting a pandemic, we should not just focus on the short-term battle to contain corruption, but also on the longer-term goal of a significant reduction in the disease. Intolerance is a key weapon and there is more of a stigma attached to corruption these days. Additionally, the technologies for fighting corruption have improved over the last decade. These innovations have afforded automated detection, fast access to big data for better analyses, and immediate sharing. Among the results: more prosecutions of corrupt public officials, the rise of a “compliance culture” in corporations, and networks of media and non-governmental organizations dedicated to the eradication of corruption. While these activities may not stop all corruption, they provide a disincentive. As the saying goes, sunshine is a powerful disinfectant.
