corruption - Afrikan Heroes

Corruption Has Modernized, so Should Anticorruption Initiatives

July 16, 2020

David Malpass President of the World Bank Group

By Jim Anderson

The World Bank’s commitment to helping countries control corruption dates to 1996 when then President James Wolfensohn made his “cancer of corruption” speech. It was the first time the issue was given such prominence by a World Bank President and put squarely on the agenda of the institution.

A lot has happened since then. In 1996 only 22 countries had right to information laws, compared to 123 today. The Open Data revolution had not yet begun; neither technology nor attitude supported such openness in most countries. Global standard-setting instruments such as the OECD Anti-Bribery Convention and the UN Convention Against Corruption, were envisioned at that time but not enacted. Others, such as the Extractive Industries Transparency Initiative (EITI) got launched and matured since. Behavioral economics had not yet been recognized by the Nobel Prize committee. No one had heard of GovTech, and the Open Government Partnership had not yet been established. Terms like illicit financial flows and e-procurement were not common, and the Panama Papers and Luanda Leaks were well in the future. And no one had heard of COVID-19.

Addressing corruption not only saves money and stops bad behavior; it helps achieve a wide range of development goals. Think, for a moment, about the many ways corruption can undermine human capital development. Ghost workers in the education system, kickbacks for school meals contracts and false degrees, weaken the efficacy of learning-related spending. Bribery and fraud in procuring pharmaceuticals or medical equipment can weaken survival rates and constrain the ability of children to thrive. Corruption in infrastructure and among traffic police can lead to unsafe roads, weakening human capital and undermining access to opportunities.

“Corruption has evolved over the last two decades, and in the course of the COVID-19 response. Our approach is evolving as well.”The World Bank’s approach to controlling corruption needs to keep up with the times. What should we be doing differently? Anticorruption Initiatives—Reaffirming Commitment to a Development Priority outlines an approach, organized around five initiatives.

Global norms and standards are essential in shaping policy and ensuring governments take action. The World Bank’s global perspective can help. Progress in the criminalization of corrupt acts and in strengthening transparency has shown the value of standards. Can greater consistency in approaches to beneficial ownership transparency, management of conflicts of interest, and other areas do the same? How can we better track progress? The initiative on Global Standards and Monitoring proposes some areas of focus.

Corruption is often transactional but it can also be embedded in networks, tilting the playing field to the advantage of political elites and connected firms . Given what we’ve learned about power, politics, business and corruption, can we do more to address state capture? The initiative on Power and Money takes on this challenge.

Transparency has value in its own right. Access to information is a basic human right. How can we take advantage of new technologies to analyze the torrents of data for patterns we wouldn’t otherwise notice, and better engage stakeholders for oversight, and accountability, and to make services more responsive and equitable? The High Definition Transparency initiative supports efforts to respond to these challenges.

Corruption comes in all forms, and these can vary systematically. Controlling patronage networks in customs, for example, calls for approaches different from those needed for embezzlement in state-owned enterprises or bribery in the courts. It’s been 13 years since The Many Faces of Corruption outlined sector-specific approaches. A Sector-Based Approach will update our work to reflect the changes in technology and thinking.

The common definition “abuse of public office for private gain”, projects an image of a lone person doing wrong. In many cases, though, they get help from bankers and lawyers and accountants, sometimes in off-shore jurisdictions and financial centers in advanced economies. And what about the behavior of the firms and individuals? Addressing the Facilitators initiative highlights what can be done in the professions and locations that facilitate corruption and take on the stubborn social norms that surround both bribe payers and bribe takers.

We will be expanding on each of these initiatives in a series of blog posts. Corruption has evolved over the last two decades, and in the course of the COVID-19 response. Our approach is evolving as well, to reflect the global and local challenges countries face today as well as the new opportunities presented by technology, behavioral and political science insights, a growing global community focused on norms and standards, and partnerships. Our paper reflects these new realities and sets out a road map to work closely with governments, international partners and civil society to take anticorruption in new directions and reaffirm that controlling corruption is a development priority.

Jim Anderson is a Lead Governance Specialist at the World Bank

The land border between these two East African countries now has just a single border post. This project, the One-Stop Border Post, was set up at Namanga, a town of 16,000 inhabitants that straddles Longido District in Tanzania and Kenya’s Kajiado County in Kenya. By cutting the crossing time to a maximum of half an hour, the One-Stop Border Post project has boosted trade and tourism between Kenya and Tanzania. To set up the border post, the African Development Bank in 2007 approved $185 million in funding, of which $108 million went to Kenya and $77 million to Tanzania. The Bank co-financed the project with Japan International Cooperation Agency. The development has boosted the regional economy by streamlining, along with improved roads, the movement of people and goods across the border. According to Kenneth Bagamuhunda, Director-General, Customs and Trade of the East African Community (EAC), “The idea now is to reproduce this initiative on other borders, such as that with Ethiopia, the Democratic Republic of the Congo and Zambia.”

One driver who has been plying that route for over 20 years said that “Customs clearance used to be a real challenge here, because there were two borders. You had to go through at the Tanzanian immigration office, and then repeat the exercise on the Kenyan side. It used to take between one and a half and two hours,” he said, smiling. “That’s all changed now. When passengers arrive, it doesn’t matter which side they come from, a single checkpoint does all the administration and they are able to carry on across the border.”

“Thanks to the new crossing point, road traffic has increased,” said Edward Wilson Lyimo, the owner for more than 20 years of a hotel on the Tanzanian side of Namanga. “Businesses have become profitable and this new crossing has really helped us. Now, we can do business in both countries.”

The African Development Bank is working to support regional integration, cross-border trade, tourism, the socioeconomic development of the region and poverty reduction.

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry

Fighting fraud from the top By Ayanda Kotobe

September 11, 2019

Fraud is at its essence the result of mirroring

Why do we stop at traffic lights? It’s not because we are naturally attuned to seeing red as the order to stop. If that were the case, red dresses and apples wouldn’t be as popular as they are! Red catches our attention, but we stop at a red light because everyone else does.

Humans copy each other. It’s often said that if you want someone to be more comfortable with you, mimic how they sit or stand. Psychologists call this ‘mirroring’, but it doesn’t just happen during social gatherings. Seeing someone drop a bit of trash or cutting a traffic light gives us a slight nudge into thinking it’s okay. If they are doing it, maybe I can too.

Fraud is at its essence the result of mirroring. It would be convenient to consider all fraudsters as hardened criminals who’d sell their granny if the price were right. But fraud investigators often point out that such activities have simple beginnings. The Enron scandal, so devastating that it destroyed an American energy giant, had its roots in some minor manipulations to meet earnings expectations. Yet when the people involved got away with that, they scaled up and even justified their actions as legitimate – at least to themselves.

This is why fraud prevention starts at the top. There has to be no tolerance among an organisation’s leaders for fraud. When accountability and consequences are lacking, fraud will thrive. The culture of an environment, as well as its treatment of ethics and governance, will reflect management’s attitude towards fraud.

Leadership attitudes are fundamental, reinforced by internal controls to spot fraud. Illegal activities usually involve acts that siphon amounts from a business’ coffers. These can include payroll fraud, writing double cheques for payments, skimming tax money or over-ordering. A common fraud in South Africa and elsewhere is to overvalue a purchase and split the difference with the supplier. More recent activities include credit card fraud and bank scams. The Bankers Association of Botswana warned last year that fraudsters are becoming increasingly savvy about loopholes, especially technology ones, that organisations are not fixing fast enough.

In all these examples, it only takes a few people to abuse the trust they earned. Sadly, it’s the company that suffers when their wrongdoing is uncovered, usually because it became cataclysmic…

These can be prevented by internal checks and structures to monitor governance and compliance. Companies should also create pipelines for concerned parties and whistle-blowers to relay their suspicions. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) sets out the following five components for an effective fraud prevention system: control environment, risk assessment, control activities, information & communication, and monitoring. These work together to establish sound internal controls through directed leadership, shared values and a culture that supports accountability.

Increasingly, more of these controls can be automated in modern companies, particularly where high transaction volumes take place. It’s additionally effective to consolidate suppliers to a few that you know can be trusted and are serious about their integrity. Creating reliable procurement channels with those suppliers will help employees stick to legitimate activities.

There is also no reason any more to be ignorant of a company’s finances: even if you have accountants and other fiscal gatekeepers, it is possible with modern software services to generate ad hoc reports and scrutinise patterns using visualisation dashboards. At Kenya’s major banks, employee fraud is often a greater risk than third-party fraud. Headline-grabbing South African frauds such as seen at Fidentia and Steinhoff were perpetrated by the very accountants meant to have policed such activities.

It might sound as if the fight against fraud means reducing trust in employees. This isn’t the case. Instead, it is about narrowing those gaps where fraud might take place, so as not to normalise such activities. The tone should start at the top, from leadership and management who embrace sound controls and good governance. Consequences must be enforced and felt.

Everyone will eventually ignore a traffic light if they see enough people do this. In some countries, you can see traffic officers haplessly direct vehicles that ignore them. Are all those drivers criminals? In terms of traffic laws, yes. But did they start as criminals? No. And do they see their behaviour as bad? It’s unlikely. Not until they are caught – and if it were business fraud, by then it might be too late for their employers.

Ayanda Kotobe is the Finance Director at RS Components .

Kelechi Deca