Corruption and Fraud Stunt Third-world Growth, Part Two

By W. Michael Kramer, J.D., CFE

In the May/June issue of The White Paper, we learned how corrupt officials burden developing countries with unfinished projects and crushing debt, which can lead to economic decline and international terrorism.
Specifically, we examined the three most common and inter-related fraud schemes that afflict international projects: kickbacks and bribes to influence the award of a contract, bid rigging to assure selection of the corrupt bidder, and fraud to recover the cost of the bribes and exploit the corrupt relationship.
Here we look at red flags, countermeasures, proof of fraud and corruption in international cases, and possible remedies.

Red Flags of Corruption and Fraud
Corruption and fraud in international relief projects exhibit common telltale signs.

Bribes and Kickbacks
Local "agents" or "consultants" appear touting ill-defined, generic, or unneeded services. Many of the warning signs of corrupt agents (including loan brokers) are rather obvious:

  • The agent operates in a country with a reputation for corruption.
  • The agent's fee is too large for the services to be provided.
  • The agent provides little or no useful services or work product.
  • Payments are calculated as a percentage of the contract value rather than based on time expended or services provided.
  • The agent's contract is boilerplate and only vaguely describes the services to be provided.
  • The agent has no permanent business premises or staff.
  • Government or project officials recommend or insist on a particular agent or consultant.
  • The agent requests payment to an account in a secrecy jurisdiction.
  • There are unexplained or unusual delays in the procurement process as kickback amounts are negotiated or project officials try to defeat the controls.

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