Tackling fraud and corruption during crises

The pandemic revealed how rapid crisis spending creates profiteering opportunities for exploitative and corrupt actors. Strengthening anti-corruption measures is urgently needed to ensure that the anticipated investment surge toward achieving Agenda 2030 truly benefits the planet’s most vulnerable

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Members of the West Virginia National Guard testing for COVID-19 during the early stages of the pandemic. The global surge in demand for personal protective equipment (PPE) led to widespread claims of profiteering or price-gouging, corrupt acquisition processes and fraudulent supply of faulty goods. © U.S. Air National Guard /Emily Beightol-Deyerle

COVID-19 was the first pandemic of the cyber era. But it is far from being the first epidemic or pandemic (or other natural and/or human-made disaster) that has had a connection to fraud or corruption. Nineteenth century epidemics generated opportunities for fraudulent (and for scientifically mistaken) medicines and for corrupt public works – provided that governments were persuaded that illnesses could and should be reduced by new public works and awarded insiders the contracts. 

And, of course, elite or less elevated criminal interests can promote or stand in the way of changes, depending on how they affect personal and institutional interests.

Some criminologists have argued that “opportunity makes the thief.” But, while stimulating and provocative, this tells us only part of the story. Opportunity is a necessary but certainly not a sufficient condition for crime. In the case of COVID-19 and other pandemics, the creation of artificial opportunities is a good place to begin our understanding.

There are always “natural” opportunities, and some creative offenders can make use of them, provided they have the networks that are necessary to complete the criminal tasks successfully. These can include negligent or corrupt public officials, auditors, bankers, and customs or law enforcement, some of whom may instigate the corrupt transactions. But there are also artificial opportunities created (often unintentionally) by some governments and other bodies. These include business and individual support loans (many of which turned out to be grants!) that were made available variably in Global North countries during COVID-19 in ways never before seen, except locally in the aftermath of declared major disasters. Understandably, reviews of these expenditures are conducted nationally, and relate to the programs funded. But there have been some reviews of foreign aid related to COVID-19.

The International Monetary Fund, Organisation for Economic Co-operation and Development, and the World Bank, plus non-governmental organizations such as Transparency International all issued anti-corruption guides before the pandemic was at its height, but it is uncertain what notice anyone in the Global North or South took of them. There is no international and only little national data, even about prosecutions in the aftermath, nor many evaluations of the processes or impacts of prevention efforts, except by some audit bodies such as the US General Accounting Office and the UK National Audit Office. 

Fraud and corruption are not the only reasons for the frustration of the Sustainable Development Goals (SDGs). But they can be significant impairments because of what they reveal (or are believed or claimed to reveal) about the societies and “control systems” in which they occur. SDG 3 on health and wellbeing is at risk if corruption in public health institutions is allowed to thrive, and SDG 16 on justice, peace, and integrity is also imperilled by this and many other factors.

Public health profiteering through the ages

Let us begin with some history. In his book Death in Hamburg, Richard Evans asks why nearly 10,000 people were killed in six weeks in Hamburg following the 1892 cholera outbreak, while most of Europe was left almost unscathed. He attributes these excess deaths to:

  • Hamburg’s “free city” status
  • a laissez-faire neglect of public-health policy
  • adoption of medical theories with a weak evidence base
  • the miserable living conditions of the poor

However, Evans notes (personal communication) that there was little evidence of corruption in the public administration in Hamburg at that time. 

Wartime exploitation by some businesspeople – if and when exposed – led to public reaction in legislation against profiteering in the UK and “price gouging” in the US (federally). A range of natural and corporate-aggravated disasters in the Global North and South have prompted similar responses (as I and Russell Smith note in Fraud and its relationship to pandemics and economic crises: From Spanish flu to COVID-19). However, the price mechanism also works to equate demand and supply. The surge in demand for scarce goods like personal protective equipment during COVID led to price rises to ensure ‘better’ supplies in the Global North (even if some of them turned out not to work).

Crimes against public and government

There are two kinds of circumstances under which fraud and corruption flourish during pandemics (and will do so in the future): public-facing and government-facing crimes. Much effort and resource went into combating public-facing frauds in the UK during COVID-19, reflecting law enforcement and bankers’ assessments of extra risks. There are many important lessons here for SDG 16, SDG 3 (in the case of health scams), and emerging crime threats to other SDGs. For reasons of space, I will focus here on government-facing fraud and corruption threats that also harm the public.

Past health emergencies and natural disasters have been plagued by corruption challenges. In the United States, which tends to prosecute aggressively, the aftermath of Hurricanes Katrina, Rita, and Wilma saw numerous cases of corruption, with over 1,439 people charged by 2011 for crimes including: 

  • fraudulent charities
  • government and private-sector benefit fraud
  • identity theft
  • government contract and procurement fraud
  • public corruption

When Ebola caused a crisis in west Africa, corruption led to the diversion of funds and supplies and compromised containment measures, due to citizen bribery to evade restrictions on their movement. In several African, Asian, and Latin American countries, senior public officials were charged with corruption during COVID-19 (see U4’s article COVID-19 and corruption and Transparency International’s report The Ignored Pandemic).

In many such countries, corruption in service delivery inhibited access to healthcare for the most vulnerable groups, though vaccine hoarding (and the inability to distribute deteriorating vaccines) also imperiled SDG 3. SDGs 6 (clean water and sanitation), 7 (affordable and clean energy) and 13 (climate action) also generate risks: longstanding carbon credit frauds against government and investors also affect the environment when they are not real, and can even undermine public confidence in investment media.

As Malcolm Sparrow argues in his book The Character of Harms, it makes a difference to our conception of harm and threat whether people are “conscious opponents” and, by extension, what sort of conscious opponents they are. Those collecting evidence for the links with the SDGs should be neutral as to whether the misconduct is called “fraud” or “corruption” and whether it is handled through the criminal or regulatory process. The key thing is the harm that undermines the progress toward the SDGs, and how we can mitigate it: just because offenders don’t deal drugs or look like gangsters does not mean they should not be characterized as “organised criminals.”

Control measures

Below I outline some suggested measures to minimize fraud and corruption in future pandemics:

  1. Mainstream anti-corruption into the pandemic preparedness and response plan. 
  2. Pre-assess fraud and corruption risks in government and private sector schemes. 
  3. Support a wide range of civil society participants in their fraud and corruption prevention efforts.
  4. Commit to transparency in loans and other government funding, and conduct link analysis into the relationships between ‘borrowers’ using criminal and commercial intelligence databases. Then, act on that intelligence to close down the operations, whether or not accompanied by criminal sanctions.  The earlier this is done, the more money is saved, which is cheaper than chasing the money afterwards.
  5. Commit to transparent and accountable procurement, with less overriding of controls than was noted in COVID-19 procurement, and early follow-up by auditors for links between contractors and suppliers waived through normal procurement rules.
  6. Use money laundering and counter-fraud controls more proactively. Often a long time elapses between the commission of fraud and its detection by the victim or a public or private sector third party. Law enforcement resources are also a major constraint (even if the “case” reaches that stage); slack record keeping and a need for international cooperation may make conviction impossible. In larger cases, professional intermediaries and bank accounts are necessary components in presenting a plausible front and in obtaining and laundering the funds, and sending them to foreign locations from which asset recovery is difficult. 
  7. Invest in monitoring and evaluation to learn critical lessons. Maintain that institutional learning when staff leave.

Zero fraud and corruption are not plausible objectives. But keeping them to a low level, and realistic planning for future pandemics and climate change emergencies should be routine for all countries in the Global North and South. Even without corruption, there remain huge challenges in attaining any or all of the SDGs. But the level of allegations about corrupt insider benefits during COVID-19 de-legitimate governments and international bodies.

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