Bailout Fraud Could Tally $500B Globally

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"":http://www.kroll.com/fraud. ""Kroll"":http://www.kroll.com is a risk consulting firm, headquartered in New York City, with more than 65 offices throughout the United States and around the globe. The company's report 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"":http://www.transparency.org, a global coalition that crusades against political and private sector 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 percent in a stable economy - an equivalent of $500 billion in corrupt gains - but in emergency situations those costs can rise as high as 30 percent of the overall cost of the contract.
Blake Coppotelli, senior managing director in Kroll’s business intelligence and investigations practice commented, ""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 added, ""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.""
In its ""Global Fraud Report"":http://www.kroll.com/fraud, Kroll warns that tendering processes should be as transparent as possible, including the distribution, receipt, and use of government funds, and the procurement of contracts paid for with these funds. The risk mitigation company says agencies and vendors should be held accountable for instituting and complying with transparent processes. In addition, Kroll advises that government investigators and regulators must be properly resourced with budgets that enable them to root out corruption, rewards should be provided to officials who deliver projects successfully, and appropriate salaries should be used to discourage bribery.