You can’t predict a crisis – but you can prepare for the rise in bribery & corruption risk that it will generate
During the recent hurricanes, I logged onto my online banking service and the speed of today’s crisis response was clear. My bank was offering to help victims by delaying mortgage payments as well as other financial assistance.
But it wasn’t just legitimate business that were quick to respond: the fraudsters were equally fast off the mark. As the floodwaters were still receding, the US Justice Department announced it had already received more than 400 fraud complaints involving relief aid in the wake of Harvey and Irma – and added that it expected a spike in complaints in the coming months.
It isn’t hard to see why crises such as hurricanes and fires provide fertile ground for bribery and corruption. As donations and government aid flow into the affected area, the focus – quite rightly – is on getting the cash out as fast as possible to help the victims.
The resulting combination of speed and lack of control creates opportunities for fraudsters, who look to capitalise on the suffering of others by grabbing an undeserved slice of the funds. These risks cover a wide spectrum, from contractors putting in fake bids or accepting bribes, to people filing for benefits to which they’re not entitled, to insurance frauds and more.
Given this range of potential opportunities for fraud, it’s not surprising that Harvey and Irma triggered an upsurge in corrupt activities. But while it’s clearly impossible to predict precisely when and where crises like these will strike, what we can be sure of is that they will happen at some point – and that when they do, frauds will follow.
In my view, what’s clear is that we need frameworks in place to ensure the recovery and restitution efforts will be as fraud-free as possible, while still allowing the aid to flow to the people in need. And ideally, these frameworks won’t just enable communities to recover, but will actually leave them stronger than before the crisis struck.
What will the frameworks look like? Interestingly, PwC’s recent thought leadership report – “Five forces that will reshape the global landscape of anti-bribery and anti-corruption” – points to some of their key characteristics. See the image below for our predictions at a glance.
Indeed, three of the forces we highlight in the report are especially relevant to the preparations that can be made before crises to prevent frauds afterwards. The first is societal action, tapping into people’s anger about fraudsters preying on others in need. The second is important role that technology can play in tracking and tackling corruption in all its forms. And the third is the rise of ethical and transparent businesses, who will avoid any criminal behaviour and report it when they encounter it.
Acknowledging that fraud is an unfortunate but common occurrence after a crisis enables you and your team to be better prepared for it, should a disaster strike and large sums start changing hands in any capacity afterwards. With this risk in mind, our Global Crisis Centre team monitored public information on social media and identified reports of fraud immediately following the hurricanes. Our concerns proved well-founded, with our investigations uncovering schemes ranging from contractor fraud to guidance on how to make false claims to FEMA. Of course, we shared these findings with clients potentially at risk.
Going forward, as larger funds are established, we may play a role in driving program integrity through the disbursement process. This is something that we typically do following disasters, including confirming that victims are who they say they are and have suffered the losses they are claiming. This monitoring and diligence process benefits all victims, as it leads to a fair and transparent process and gets funds to those most in need. Incorporating these capabilities into your disaster and crisis planning in advance leads to a lower likelihood of fraud – and the resultant accusations of a flawed process – after the fact.
The message is clear. At a time when unplanned events seem to be happening with disturbing regularity, we can’t know for sure when or where the next one will strike. But we can be ready to deal with its aftermath – including the rise in bribery & corruption that will come in its wake.
PwC’s Global Economic Crime and Fraud Survey 2018 will be published in February 2018. Watch this space.