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Kroll report details fraud opportunity associated with increased Government spending

Kroll : 24 June, 2009  (New Product)
Global fraud report from Kroll highlights the concept of increased opportunity for fraud and corruption linked to stimulus spending by Governments
Government stimulus funding totaling $5 trillion has unintentionally introduced new opportunities for fraud and corruption worldwide, according to the latest edition of the Kroll Global Fraud Report. The report reinforces the global risk consultancy's consistent call for greater transparency and compliance among organizations worldwide, and coincides with FBI Director Robert Mueller's recent announcement that corruption and fraud tied to stimulus spending may be the "next wave" in financial fraud cases.

Data from Transparency International, the global coalition against corruption, puts into perspective the heightened risk brought on by today's financial crisis. According to the coalition, corruption can raise procurement contract costs by at least 10% in a stable economy - an equivalent of $500 billion in corrupt gains - but in emergency situations those costs can rise as high as 30% of the overall cost of the contract.

Blake Coppotelli, senior managing director in Kroll's Business Intelligence and Investigations practice said: "Governments need to be aware of the significant risk of corruption that coincides with stimulus funding. Federal and state agencies controlling the distribution of these funds need to enhance their already stretched resources to oversee and enforce robust anti-corruption policies or look to independent experts to supplement their efforts. They also need to make sure that vendors receiving funds have strong anti-corruption initiatives and compliance programs, and are screened and monitored throughout the process."

Government spending is often targeted by fraudsters, because the nature of the projects - large sums of investment coupled with complex procurement processes - provide both the motive and the means for opportunists to take advantage. And with the equivalent to Japan's annual national output being plugged into the economy in fiscal stimulus packages set by world leaders at the G20 London Summit, the opportunity to fraudsters has become significantly more attractive.

Richard Abbey, managing director in Kroll's Financial Investigations practice said: "All crimes need motive, means and opportunity and in the current economic environment, we have all three. The unprecedented amount of financial support that governments have pledged to help stabilize their economies leaves the door wide open to fraudsters. It's a once-in-a-generation opportunity for those engaging in corrupt practices to cut themselves a large slice of the pie and it's important that governments and businesses alike are aware of the risk and are prepared to counteract them."

The Kroll Global Fraud Report addresses these rising concerns and offers guidance to governments in tackling corruption:

1 Tendering processes should be as transparent as possible, including - but not limited to - the distribution, receipt, and use of funds, and the procurement of contracts paid for by these funds.

2 Agencies and vendors should be held accountable for instituting and/or complying with transparent processes

3 Government investigators and regulators must be properly resourced with budgets that enable them to root out corruption

4 Rewards should be provided to officials who deliver projects successfully and appropriate salaries should be used to discourage bribery
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