Corruption and safeguards against fraud?

Corporate scandals in the developed world and its consequent effects on investors and public have seen the emergence of new laws and tightening of the regulatory regimes and corporate governance. Enron’s former chief executive Jeffrey Skilling faces a sentence up to 185 years having been found guilty of 19 charges while Enron’s Chief Financial Officer too is currently serving a 10-year sentence. Existence of extradition laws between the USA and the UK was also instrumental in moving the famous NatWest three to USA where they were served with arrest warrants.

Developed countries have been moving swiftly on fraudsters with appropriate legislation and have been able to prosecute them. Investigators’ tasks are made difficult with the new breed storming into the IT areas. While white-collar crimes are on the increase organized crimes in terrorism, bribery and corruption have not slowed down providing enormous economic gains to criminals.

Legal and prosecution machinery in the Third World are still behind times and the cost to the citizens of these could be significant. Sri Lanka recently formalized legislation on terrorist financing and money laundering two areas where fraudulently earned money is channeled. It is common for criminals who engage in fraud to slip out of the home country to escape prosecution. Recently the VAT scam involving over Rs 3 billion of public funds hit the headlines and some of the suspects are said to have escaped from the country.

According to research based information, UK frauds cost the country over 14 billion pounds annually with majority of the losses borne by the public.

The UK government is taking a serious view of the alarming increase in crime and in particularly the IT related cases prompting the government to introduce a fraud bill in the parliament. A few years back there was some euphoria when there was some speculation that the Sri Lankan government was going to appoint an Anti Corruption Commission but this thought never saw the light of the day.

As far back as 1999 the UK Law Commission initiated a process to examine ways in which criminal law dealt with fraud and a report was published which made several recommendations including the introduction of the general fraud offence enabling the law to be made more comprehensive.

The Permanent Commission for Bribery and Corruption, declaration of assets by public officers, parliamentary select committees for parliamentarians and the ombudsman are some of the existing checks in the Sri Lankan system, unfortunately these instruments to date have failed to meet the growing civil society demand and confidence for corrupt free society. The only exceptions have been the enforcement of law against some ministers and MP’s under the Bribery Act somewhere in the middle of the last century. In the developed west and the industrialized East Asia, corruption is treated with all the seriousness with prosecutions and punishment to the guilty.

Countries in the region like India (Central Vigilance Commission), Hong Kong (Independent Commission against Corruption), Bangladesh (Bureau of Anti Corruption) and Singapore and other countries like Australia (ICAC), UK, USA and even some of the African countries have already enacted legislations to give strength to “Fight against Corruption” a priority need.

The World Bank and Transparency International along with OECD have carried out extensive research in corruption in most of the countries and are continuing with their action plans for better governance.

The World Bank defines corruption as “use of public office for private profit” while Transparency International defines corruption as “misuse of entrusted power for private gains”. Corruption is a multifaceted product coming under the form of bribes, kickbacks, extortion, commissions, nepotism favoritism, abuse of power etc.

Apart from public officials, politicians or businessmen today corruption has seriously affected even the sports bodies and non-governmental organizations. Immense power in the hands of politicians (further complicated through electoral systems) delayed justice and weak enforcement, scarcities of goods and services, complicated, rigorous rules and procedures, quality of public servants, poor accountability and the network support flowing from the socio political relationships are some of the key reasons for corruption to flourish.

Corruption brings a disproportionate amount of monetary returns to those who are involved in it without much fear or risk of being prosecuted.

We could draw some knowledge from the Indian example to enact legislation to forfeit property of the wrongdoers through the Corrupt Public Servant’s Act, which extends its jurisdiction to Politicians too.

We also need to create an anti corruption culture, and this could be best achieved by grooming children from their school days.

This will naturally build a youthful force that will be able to bring a tremendous amount of influence on the rulers with their ideological attitudes. What Abraham Lincoln professed on corruption more than a century ago holds true even today.

While on fraud and corruption it is heartening to note that the vacancy of the Auditor General has been filled after a certain period of anxiety to the public. There should be more formally organized methods and procedures to fill high-ranking officers like Auditor General, Commissioner General of Inland Revenue with proper succession planning and adequate human resource management that is sadly lacking in the public service today.