Ending Fraud And Corruption - Because It Is Possible

Below are excerpts from two interesting and well-documented articles on fraud and corruption.

Food fraud

Food fraud is a huge problem in the UK, and much of it is as a result of organised crime. Unfortunately, as the report of the Elliott Review on the 2013 horsemeat scandal now points out, there is too little evidence to gauge the full extent of fraudulent practices in the industry.
Food mis-labelling is widespread, as is the practice of substituting premium commodity products in whole or in part with cheaper ingredients. Actually, substituting modestly priced ingredients with even cheaper ones is not unknown. We might have guessed that substitution was happening – there must be a reason some foods are so cheap – but it becomes serious when, say, ground peanuts are substituted for ground almonds and appear in restaurant meals. This could prove dangerous or even fatal to people with allergies. At the other end of the scale come foods which are systematically adulterated with chemicals or are even completely counterfeit.
Generally speaking, businesses across all industries usually lack specific practices designed to prevent fraud. Like householders with minimal security, there is a tendency to hope that break-ins are something that other people experience. Food supply networks, however, are vulnerable. They are characterised by a relatively small number of major retailers and caterers being supplied by thousands of small and medium businesses which are owner-managed. Allegiances and arrangements between suppliers, intermediaries and customers change frequently. Contracts are used less often than is supposed and verbal communication is often preferred, to keep things moving. Some chains, as noted in the interim Elliott Review, are very long and one batch of one product can be widely dispersed.
There are supply chain management standards in the industry and most suppliers have certification to show that they comply with them. Retailers, caterers and manufacturers rely on these certifications but until recently, these standards and recommended supply chain audits contained very few, if any, questions on fraud.
Finally, few businesses appear to have the systems in place to turn the mass of data that they do have on food safety events and traceability into useful information for management. Businesses which monitor agri-food news and other data have an advantage. However, the small and medium-sized businesses that make up the majority of companies in the middle of the food supply chain do not have the resources for management control, audit or pro-active data seeking that are required.

from here



Corruption

Corruption is an urgent global problem, one that costs the developing world dearly and badly slows its development down. But until recently, figuring out just how big the problem is, and what to do about it, has been fiendishly difficult.
Now, the ONE Campaign has launched an important report (filled with useful information) calling on the G20 nations to address the “trillion dollar scandal” of global corruption. In it, the campaign estimates that a web of corrupt activity robs developing nations of at least US $1 trillion every year.
Similar figures have appeared in other estimates: the World Economic Forum, for instance, has estimated the cost of corruption to be more than 5% of global GDP (US $2.6 trillion), while the World Bank believes more than $1 trillion globally is paid in bribes each year.
Of course, while there can be little doubt that corruption costs the global economy dearly, the secretive nature of corrupt exchanges makes uncovering their true extent a tricky task indeed.
Given the staggering corruption figures that are being floated, it’s hardly surprising there is a serious impetus to develop accurate ways to measure corruption – to show not only how much corruption exists in the world, but also where it occurs and with what frequency, and ultimately to provide guidance on how to stop it.
The most widely used measure, Transparency International’s Corruption Perceptions Index (CPI) which is published yearly tries to quantify national corruption by measuring how experts, business leaders, and the public perceive it in their countries.The CPI has been politically extremely influential; it has done a lot to raise awareness about the extent of corruption in different countries, and on its face, it provides a reasonably useful broad-brush picture of the overall extent of national corruption. But despite the way CPI is almost cherished as a data source, it’s still seriously flawed.
The level of consistency across years we found is so strong that it clearly makes no sense to treat each annual score as separate. Given its lack of variation, the CPI might as well be published every five or ten years, since there would be very little loss in precision.
We repeated this analysis for another widely-cited perceptual measure of corruption, the World Bank’s Control of Corruption Index, and found essentially identical results: extreme consistency even across an 11-year time period.
These findings show that as a way to measure corruption, perceptual measures have serious – and still underappreciated – limitations.
In response to concerns like these, there have been many attempts to create new corruption measures that rely on (seemingly) more objective sources – crime statistics or accountancy data, for example – in hopes that these data provide information about the objective rate of corruption. But even these promising efforts still face big problems. Crime statistics, for instance, are particularly susceptible to subjective judgements about what corruption actually is: whether and when bribery, fraud or theft count, for example.
Using accountancy data, meanwhile, demands similar judgements about how to classify “missing” resources. Is all money that has disappeared indicative of corruption? Could it be a result of theft – and could that theft still count as corruption if so? Is chronic inefficiency in some areas necessarily a result of corruption? In practice, of course, corruption actually takes place in concrete settings and specific places, in ways that do not easily map onto the nation-state. There may be significant variance at local level when dealing with corruption in particular sectors of an economy, corruption involving trans-national or cross-border networks.
The approach the ONE Campaign has taken is that instead of constructing an international ranking of some kind, it highlights the scale of the problem across the developing world as a whole – and shows how the G20 nations can make a concrete difference. This is a big advance on the CPI-centric idea that simply comparing countries' individual corruption records is a serious way of addressing the problem.
As the report points out, the fact remains that many of the proceeds of corruption in the developing world are still allowed to flow through established financial centres in the developed world – London, New York, Hong Kong – via anonymous shell companies, who in turn funnel them to offshore tax havens.
These corrupt flows, still insufficiently understood (never mind policed), are the real corruption scandal – and cracking down on them is beyond the capacity of the developing nations they exploit.
The report’s research estimates that US$20 trillion (page 4) of money illegitimately removed from developing countries is now held in offshore tax havens around the world.

from here

Now to the crux of the matter: fraud, corruption, theft - in one way another are tied up with the current global system which, through its monetary system, enables, and some would avow encourages such practices. With a system of common ownership when everyone has equal access to the world's wealth and 'private' property is a thing of the past, there will be no motivation for fraud and corruption because there will be neither benefit nor pecuniary interest to be gained as nothing will be up for sale or barter. Regions will have true inclusiveness in democratic decision making unlike that which is experienced in any so-called democracy currently. Global interdependence as opposed to hegemony, colonialism or client and compliant states.
JS