Ingrida Kerusauskaite l Palladium - Mar 01 2021
COVID-19 Has Financial Crime on the Rise: An Expert Weighs in on How to Disrupt It

Credit: Eduardo Soares

Disruptions from COVID-19 have presented countless opportunities for criminals to take advantage of the pandemic-induced chaos and continued to provide opportunities for others to join them. In the past year, we’ve seen everything from allegations of procurement fraud (e.g., sales of non-existent personal protective equipment (PPE)) to misuse of funding meant for PPE and large scale investment and phishing scams (such as stealing bank details by inviting applications for vaccines).

In response to global lockdowns and shifts to remote work, businesses have had to put new systems in place to move their operations online, banks disbursed more loans, disbursing bounce-back loans as part of government relief packages in many countries, and individuals moved more of their lives, including shopping and administrative tasks, online.

At the same time, government budgets for international development shrunk with country GDPs and funds were redirected to healthcare away from other initiatives, including those supporting governance and integrity. Nevertheless, governments, businesses, and other organisations were quick to adapt to the changing situation, putting systems into place to ensure operations under the vastly different circumstances and prevent, detect and pursue fraud, corruption, and other types of criminality within their operations.

Despite these often-reactive prevention measures, there have been numerous reports of abuse, especially in the first year of the pandemic. It’s safe to assume that the fallout from the pandemic may lead to a sustained increase in cases of fraud and corruption in 2021.

The Circumstances for Crime

For those looking to identify why people might be engaging in fraud and direct resources to investigate, Cressey’s ‘fraud triangle’ can be a useful tool. This theory focusses on three key drivers that cause fraud or crime; pressure, rationalisation, and opportunities. Suffice to say, overall circumstances in 2021 and the fallout from COVID-19 have increased the likelihood of fraud and corruption for all three.

Despite these circumstances, we’ve witnessed countless acts of kindness, increased community spirit, mutual support, and social rejection of those that profiteer off the vulnerable at such a time of crisis. The latter was particularly apparent in the public outrage at price gauging attempts by those stockpiling sanitiser and PPE at the height of the pandemic.

The combination of these factors means that businesses, governments, and private citizens can all play a role in tackling corruption and financial crime.

1. Transparency and sharing of expertise are even more important for both the public and private sector.

The public now expect a certain level of transparency from governments and businesses. A judge in the UK recently ruled that the government’s failure to publish PPE contract award notices within 30 days as mandated by law was a “historic failure”, arguing that "The public were entitled see who this money was going to, what it was being spent on and how the relevant contracts were awarded."

Governments and the financial sector should be transparent about the fraud and corruption during the pandemic and work responsively and collaboratively to address the system failures that allowed it to occur.

Transparency in vaccine distribution systems will serve to prevent vaccines being distributed to those within priority groups and distinguish fraudulent vaccine providers from genuine ones once vaccines become more widely available. Sharing what has worked in their sectors and organisations can help other organisations identify and combat criminal activities and deter and bring perpetrators to justice.

2. Governments are under unprecedented pressure and need to prioritise funding effectively.

Governments and their departments, particularly those responsible for international development assistance, are under increased pressure to focus their funding on healthcare interventions and mitigate the pandemic's immediate economic effects.

In addition to these vital priorities, they should plan for relatively small investments in anti-corruption systems and tracking. This will go a long way in contributing to the effectiveness of the healthcare interventions and ensuring their effectiveness and safety.

3. Businesses are under increased scrutiny to act in a socially responsible manner.

Expectations for responsible business conduct are higher than ever, and businesses should not only ensure they don’t engage in or facilitate financial crime or corruption, but actively support socially responsible and ethical ways of working. Not just within their Corporate Social Responsibility work, but their entire operations. This includes not taking advantage of government schemes that are not intended for them, and mainstreaming ethical behaviour and values within their entire operations and their supply chains.

For example, while Amazon’s profits rose significantly as a result of the pandemic, the company is under increased public scrutiny and pressure regarding their workers’ pay, benefits, and right to unionise.

In the months and years after the crisis, customers are likely to remember organisations’ behaviours during the most challenging times.

4. Temptations are on the rise, but the pandemic has illustrated the need to put community interests above individual interests.

There may be temptations for those able to acquire limited resources, such as vaccines, despite prioritisations based on need or social benefit. The negative consequences for all should be stressed to deter such behaviour.

The community spirit that has emerged during the pandemic should be strengthened and fostered, as it is a crucial element of public trust and support for those that need it the most.

Moving forward, organisations and governments should ensure that integrity and anti-corruption remains a top priority in 2021, and proactively share their experiences of what strategies have worked to curb financial crime and corruption within their operations. Emerging from the pandemic, we may see more accountable institutions and responsible businesses, better prepared for the next crisis, be it healthcare, environmental, or economic crisis.

Dr Ingrida Kerusauskaite leads Palladium's anti-corruption and illicit financial flows portfolio. For more information, contact