Combating International Corruption and Fraud
Kramer, W. Michael, Risk Management
The Most Corrupt
3. Paraguay Madagascar Angola
4. Kenya Indonesia
Source: Transparency International
Recent studies by the World Bank and other groups have found that corruption and fraud in many parts of the developing world is "endemic," "systemic" and "pervasive," the norm rather than the exception. Corruption is now considered to be a leading cause for the failure of development programs in Sub-Saharan Africa and other parts of the third world, despite the investment of more than a trillion dollars over the last thirty years. Since most aid is given as loans, the wasted funds further burden the countries with unproductive, crushing debt.
The situation is just starting to get the attention it deserves. The World Bank and other development agencies are funding anticorruption initiatives for their members and have formed investigative units to monitor their own programs. European and Latin American countries have signed treaties and passed legislation to outlaw the bribery of foreign officials. International business groups and local beneficiaries have insisted on more oversight and accountability.
Internal Investigations for Proof
Projects at risk for corruption are difficult to investigate because of the lack of public records, shortage of competent professionals, multitude of jurisdictions involved and other barriers. However, investigations are possible.
Exercise audit clause rights. Absent the subpoena and treaty power of government agencies, private sector investigators must depend on audit clause rights to access contractor and subcontractor records and financial accounts.
Look for anomalous fees, undisclosed commissions and payments to agents, large or unusual cash withdrawals and excessive expenditures for entertainment and business development. Bribes can be paid from subsidiaries or affiliates, so watch for charges involving these entities.
Investigate and analyze the net worth of suspect employees. A global fraud and corruption scheme can be unraveled locally. For example, public records might show that a suspected bribe recipient spent a lot of money improving his home (which is where bribe money often goes first). …