Responding to Corruption during a Crisis

COVID 19

Responding to corruption during a crisis Adam Smith International

Corruption & COVID-19 News permeating about a spike in fraud during the COVID-19 crisis, as well as lessons drawn from Ebola, show us that COVID-19 requires a cross-government response. Government institutions that detect fraud and ensure that resources reach their destination are part of the frontline response to the disease. In this paper, Adam Smith International considers the responses to corruption during a pandemic and why anti-corruption institutions are important both now and in the aftermath of the pandemic.

Executive Summary

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The global response to COVID-19 pandemic has already been hampered by instances of fraud, scamming, price gouging, theft of essential supplies, and bribing to evade lockdowns.

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Key corruption risks in the short- and medium-term include irregular procurement, embezzlement of earmarked funds, opaque healthcare workforce management, and petty corruption at the service delivery level.

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The Sierra Leonean Ebola experience of massive crisis-related financial support without supporting anti-corruption, transparency and accountability institutions shows us that millions of pounds can be lost by governments as well as international actors to undocumented expenditures, unpaid hazard premiums, ghost workers, and fake customs bills.

In order to protect donor funds (taxpayers’ money) and ensure effective use of scarce resources, continuing support for anticorruption measures must be prioritised.

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The multitude of international sources of funding being directed at COVID-19, and the fluid and rapidly changing situation, means that donors should work through existing programmes.

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Corruption will remain problem after the pandemic and donors must resist a drop in anti-corruption capacity in a fit of short-termism.

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We have identified that the following should be prioritised:

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Ensuring Anti-Corruption Agencies (ACAs) remain productive during the immediate period, this is in line with recent Financial Action Task Force (FATF) guidance.

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Ensuring COVID-response funds are not embezzled, by supporting the monitoring of those funds.

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Supporting ACAs to ensure illicit financial flows do not increase.

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Court proceedings can carry on.

ASI is working with Anti-Corruption Agencies in Nigeria, Ghana, Pakistan and Somalia in ensuring business continuity during the pandemic. Our work will ensure that criminal and financial intelligence capability remains fully operational at a time when fraud and corruption risks are high and when few other government agencies are functioning; that court proceedings continue; and that COVID-response funds are monitored.

Introduction Humanitarian crises like the COVID-19 outbreak require quick responses from governments, civil society and the international community, but they also require corruption safeguards to ensure money is well spent. In this current scenario, it is tempting to deprioritise the mitigation and management of corruption risks and upholding of sanctions against perpetrators of corruption.

However, this pandemic presents an opportunity to sophisticated fraudsters, money launderers, and corrupt public officials who can take advantage of the local enforcement agencies being under capacity and the COVID-response funds.

We have already seen corrupt behaviour around COVID-19: scammers defrauding citizens in Uganda, people evading quarantines through bribing in Cameroon and Uganda, and six million masks procured by Germany getting lost at an airport in Kenya1. The recent foiled €1.5m face mask procurement scam originated in Nigeria2.In Uganda, government officials have been arrested following reports of inflated COVID-19 relief food prices3. In recent weeks, scholars and policy analysts on corruption and global health have reminded us that anti-corruption efforts should not be ignored4.

The COVID-19 pandemic has introduced a set of challenges to governments amid a lockdown of agencies to contain the spread of the virus. The continuation of essential anti-corruption functions can only be realised by enabling essential government staff to access information resources remotely. COVID-19 is highly likely to shape the operating context for months or years to come.

The risk of corruption is heightened by the massive financial and technical support that is being mobilised globally and locally to fight the pandemic.

Corruption risks directly related to COVID-19 There are multiple risks facing developing countries during this pandemic, such as: 1. The use of expedited emergency procurement processes which will increase risk of corruption due to a lessening of oversight and inappropriate use of single sourcing.

2. Theft by public officials of free medical, food and other public aid intended for the general population and unlawful conversion for sale on the black-market.

3. Reduced presence of customs officials and limited oversight, which could lead to increased customs evasion, smuggling, drug trafficking, terrorism and other illicit cross border traffic.

4. Increased risk of procurement and sale of counterfeit medications, COVID-19 tests, vaccines, and equipment - these may not be confined domestically and could find their way into western markets.

5. Lack of transparency in recruitment of additional health workers - the presence of unqualified healthcare workers could result in increased transmissions, lack of effective treatment and increased deaths as a result.

6. Fraudulent payments to ‘ghost workers’.

7. Violation of quarantine rules and public health requirements through bribing of police and security officials.

8. Profiteering by private businesses through price gouging of medical supplies and basic goods.

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U4 Basic Guide “Corruption in the time of COVID-19: A double threat for low-income countries”, 27 March 2020.

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https://allafrica.com/stories/202004160040.html https://www.voanews.com/science-health/coronavirus-outbreak/top-ugandan-officials-arrested-covid-19-purchasing-scandal

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Basel Institute on Governance, “Asset recovery in the light of covid-19 - five questions open to debate”, 22 April 2020, by Gretta Fenner; Transparency International, "Corruption and the coronavirus: How to prevent the abuse of power during a global health pandemic COVID-19: A perfect storm for the corrupt? ", 18 March22 April 2020, by Natalie Rhodes Maira Martini; Carnegie Endowment, "Coronavirus meets corruption: Recommendations for U.S. Leadership", 20 March 2020, by Abigail Bellows; special issue of the journal Global Health Action, in collaboration with the WHO.

The Ebola crisis provides the most recent case of corruption interfering with the international response to an epidemic in West Africa5. Whilst donor funds significantly contributed to slowing down the spread of disease, corruption led to the diversion of funds and medical supplies, in at least two ways: 1. Diverting funds and supplies needed to fight the epidemic in the affected countries; 2. Compromising containment measures, such as roadblocks, quarantines, and body collection and burial procedures, through bribes and petty corruption;

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‘Payments which exceeded [£1.2m] were made from the Emergency Health Response and Miscellaneous Accounts without any supporting documents’ Audit Service Sierra Leone (2014) MANAGEMENT OF EBOLA FUNDS

Sierra Leonean Ebola survivors supported by the Centre for Accountability and Rule of Law sued their government before the ECOWAS court over the mismanagement of relief funds. This after a government audit found that a third of funds earmarked for Ebola during a six-month period in 2014 could not be accounted for6. The audit also found no proof of payment of high-risk health workers' hazard allowances, amounting to more than $4m7.

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Learning from the Ebola Crisis

In Sierra Leone, Adam Smith International has provided technical assistance to the Ministry of Water Resources and Ministry of Health since 2011. The programme quickly adapted its support to help both ministries manage the Ebola crisis.

Foreign donors were not immune to corruption. An investigation by Red Cross internal auditors found that the charity lost $5 million in West Africa during the epidemic8 – about 5% of the total funding channelled through national Red Cross societies. The money was lost through overpriced supplies, salaries for ghost workers, and fake customs bills.

In Sierra Leone and Liberia, anti-corruption institutions monitored and audited domestic and international funds earmarked for Ebola relief efforts, though the sanctioning of perpetrators was insufficient. In Sierra Leone, a formal judge-led inquiry into the loss of $14 million in Ebola funds was launched in 2019, five years after the epidemic9. A key finding was the negative impact of lack of response at the time from both executive and Parliament, despite warnings issued by the Audit Service.

What does this mean in the context of COVID19?

Should donors fail to invest in anti-corruption, transparency and accountability initiatives now, they risk re-living the mistakes of Ebola aid management, forced to respond to coverage by the BBC and other news outlets long after the perpetrators have hidden their illicit gains.

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U4 Brief "Ebola and corruption: Overcoming critical governance challenges in a crisis situation", March 2015.

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https://www.reuters.com/article/us-health-ebola-leone/ebola-victims-sue-sierra-leone-government-over-mismanaged-funds-idUSKBN1E92NE https://www.bbc.com/news/world-africa-38718196

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https://www.bbc.com/news/world-africa-41861552

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https://www.thesierraleonetelegraph.com/commission-of-inquiry-questions-former-ministers-about-missing-14-million-ebola-funds/

In order to mitigate the risk of repeating the mismanagement of Ebola aid, donors should: 1. Safeguard the continued operation of the public financial management, law enforcement and justice systems, particularly as it relates to corruption, signalling to government partners that accountability, transparency and anticorruption is an essential, and not peripheral, element of the global response; 2. Promote community monitoring of COVID19 relief efforts as they unfold, through fostering coalitions between civil society and government agencies, so that transparency and accountability can lead to a more effective response; Besides risk mitigation, the response to the pandemic presents donors with an opportunity to restate the importance of anti-corruption, transparency and accountability norms. Appetite for anti-corruption has certainly faded in the time since the 2016 Summit. However, COVID-19 presents reformers and their external backers with two windows of opportunity: • During the health crisis itself, public support for accountable and transparent public management has heightened, as has the opprobrium attached to those who seek to profit from others’ suffering. These kinds of constructive, non-partisan entry points for anti-corruption reforms are few and far between, and should be seized by catalytic interventions.

• In the aftermath of the crisis, audits and assessments of government performance will likely reveal shortcomings and gaps in existing governance systems. Investigative journalists, research centres and civil society organisations will be invaluable in this task. This again provides an unique opportunity for donors to support institutional and policy reforms that will have a lasting impact.

What is ASI doing in response?

Through ASI’s anti-corruption programmes and security programmes we are already working on the following support packages, demand-driven by government counterparts and anti-corruption agencies: •

Ghana – the Strengthening Action Against Corruption programme (STAAC-Ghana) is continuing to work with each counterpart across the anti-corruption and anti-money laundering chain to ensure business continuity through virtual tools and digital platforms. o STAAC continues to support the Financial Intelligence Centre (FIC) in setting up a remote operating environment to enable the FIC to continue operating and analysing suspicious activities and transactions. o The programme is working with two key anti-corruption Law Enforcement Agencies (LEAs) to adopt a proactive approach to the identification of COVID-related fraud and embezzlement. o STAAC is using the pandemic to demonstrate greater integration of the detection and investigation functions through newly designed and developed processes and systems, to prove the new capacities of the FIC and LEAs. This initiative will work towards the generation of a complete high-quality case docket that is prosecutionready beginning with raw data, analysis and an iterative intelligence and investigative process. o STAAC is proactively developing inter-Agency collaboration for corruption/complex cases. This partnership approach will be pushed further through COVID related embezzlement investigations. It may be the precursor to joint-agency / specialist / vetted investigation teams.

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Nigeria – the Anti-Corruption in Nigeria Institutional Strengthening Facility project

(ACORN-ISF) is planning support packages with financial intelligence, investigation and judicial bodies on business continuity and support to remote working. Expected outcomes include: o A fully operational criminal intelligence capability at a time when fraud and corruption risks are high and when few other government agencies are functioning. o The detection and dissemination of COVID-19 financial crime cases. o A functioning remote network of criminal intelligence and law enforcement agencies.

Nigeria – ACORN-ISF is also supporting the Consumer Protection Commission to develop a web-portal for citizens to upload complaints on price gouging and extortion during the crisis.

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Pakistan – the Justice System Support Programme Pakistan (JSSP) is supporting the

Lahore High Court to design remote court functionalities, allowing anti-corruption court proceedings, bail hearings and first appearances to move ahead.

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Somalia – The Budget Support TA team is working with the Office of the Auditor General on strengthening oversight systems. We expect to start supporting the OAG in formulating its approach to audit of COVID-19 related transactions to ensure the highest level of transparency and value for money as possible.

The COVID-19 pandemic presents an unprecedented challenge, having devastating impacts on developing and developed countries alike. Beyond the immediate impacts the repercussions will be felt for years to come through slowed down human development and increases in poverty levels. The response will require a policy coherence that is far too often lacking. Every pound that reaches its intended target will count in partner countries and ultimately the global economy and security. Mismanagement and corruption pose a major threat. Continued support to anticorruption reforms should mitigate these short as well as the long-time risks, as well as react to the heightened demand for accountable governance by investing in lasting transformations.

For more information please visit: www.adamsmithinternational.com @AdamSmithInt