Saturday, March 05, 2011

Fraud and Corruption in Public Sector

While I am searching and preparing a literature review for a research paper about fraud and corruption in the public sector that will be presented in an international conference this coming summer, I came across several issues that I thought interested parties does worth to read amid all this corruption and fraud crisis in the Middle East. I will only add a short comment at the end. 

"£38bn FRAUD costs the UK economy £38 billion a year, with more than half that suffered by the public sector, the National Fraud Authority reported last week. That is equivalent to £765 for every adult in the UK."

SourceThe Sunday Times (London), Fraud rife in public sector, January 30, 2011 Sunday ,Edition 1; National Edition, SECTION: MONEY;FEATURES; Pg. 2

It's only when the tide goes out that you learn who's been swimming naked." These widelyquoted words of Warren Buffett  .....There are three major factors in fraud crime: opportunity, motive and rationalisation. Opportunity is related to weaknesses in the company which allow fraud to happen and create an atmosphere where fraudsters believe they can remain undetected. Motive develops from financial pressure, whether personal or corporate: the need or desire to maintain a lifestyle, or pressure from managers to meet targets. Rationalisation is a fraudster's 'internal dialogue', which provides a self-justification for the actions.

An economic downturn causes the first and second factors, and therefore causes increased incidence, but also discovery, of fraud in these periods. Clearly there will be more financial pressure, with personal spending power reduced and companies finding it more difficult to achieve budgeted results. Company managers respond to these difficulties by imposing greater scrutiny on processes and controls, partly because they need to thoroughly explore the possible reasons for under-performance, and partly because, frankly, the reduction in normal activity gives them time to do so. The results are more fraud and more discovery of fraud."

SourceHitesh PatelIan DawsonLegal Week. London: Feb 5, 2009. pg. 34

"Washington-based Global Financial Integrity (GFI) announced in a report that the cost of illegal financial activities and government corruption such as corruption, tax evasion and crime in Egypt amounted to almost USD6 billion annually to a total of USD57.2 billion from 2000 to 2008, reported Gulf News. The personal fortune of the resigned President Hosni Mubarak and his family is estimated to be between USD40 billion and USD70 billion. Switzerland froze Mubarak's assets after he resigned and now the UK is pressured to trace and freeze Mubarak's assets in the UK. Former ministers and businessmen are being investigated by Egypt's public prosecution for robbing public wealth. Also, they are not allowed to leave Egypt and their accounts have been frozen. It is worth noting that privately owned wealth is estimated to be enough to cover USD32 billion of Egypt's foreign debt"

Source"Corruption costs Egypt USD57.2b. " The Pak Banker  22  Feb. 2011,ABI/INFORM Global, ProQuest. Web.  5 Mar. 2011.
My Comment: I think fraud is global and knows no boundaries. Fraud has no religion. A fraudster is any one who commits fraud when she/ he is given the right circumstances.  









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