Economic fraud: How Africa is tackling the challenge
THE COVID-19 pandemic has stifled many sectors of the global economy. But it has apparently boosted the business of fraudsters. Experts note that some fraudsters have taken advantage of the new opportunities of the pandemic economy and that they seem to have become ever more sophisticated in their methods.
At the same time, antifraud measures are becoming more sophisticated too, with technology playing a big part, and more increasingly artificial intelligence.
In recent years, many initiatives have been put forward in the name of fighting and reducing various forms of fraud and other crimes in the economy. But have these measures actually been effective in containing fraud? Will the typical package of antifraud measures stop the fraud pandemic?
We did research into major characteristics of anti-fraud measures in several African countries. In the south we looked at Malawi, Botswana, South Africa and Zambia. In the east, we covered Kenya, Rwanda, Tanzania and Madagascar and in the west Ghana, Nigeria and Sierra Leone.
We looked at the various fraud responses to identify major dynamics and themes. We used online data from news outlets and reports on websites of private companies and government agencies to analyse the characteristics of anti-fraud measures across 11 countries.
We found a diverse set of measures had been introduced. We were able to identify 10 particular characteristics.
The landscape
The first notable feature was a remarkable proliferation of antifraud agencies and cross-agency alliances and co-operation. This was between government agencies, the government and the private sector, and at times civil society actors such as consumer protection agencies too.
Agreements, memorandums of understanding and partnerships had been signed to encourage data collection and sharing and knowledge exchange within and across borders as different actors were brought together to fight the “common enemy”.
At the State level, new antifraud agencies, taskforces, squads and networks were set up regularly. One example was the Kenya Police Insurance Fraud Investigations Unit.
We also found that a number of regulatory agencies had been established. These included competition and consumer protection authorities at national and regional levels.
Second, outreach, engagement and “empowerment” of consumers played a major role. Here, education, sensitisation and awareness raising — among business actions — emerged strongly as ways to popularise the anti-fraud fight. This was promoted by a range of actors.
Among them were banks, insurance providers, private consultancies, international organisations such as the International Monetary Fund and aid agencies, as well as nongovernmental organisations. Regional organisations such as the Common Market for Eastern and Southern Africa were also included.
Third, large-scale technology was used extensively in anti-fraud measures. This was particularly the case in financial services and banking.
Anti-fraud software in various forms featured strongly. One example was detecting fraudulent transactions. Additional technological solutions included PIN protection techniques, enhanced chip technology for payment cards and authentication technology.
Technology was also used to uncover counterfeit or substandard products.
Fourth, anti-fraud measures regularly came with rhetoric and language that was strong in giving a sense of alarm and urgency. The vices of fraud and corruption were presented as “weeds” needing to be “rooted out”. They were also referred to as a virus or a disease that needed “eradication”.
At times, warfare-type language was used, that is, fraud needed to be “combated” like an enemy.
Fifth, anti-fraud measures were regularly political in nature. Pledges to counter fraud featured in election campaigns. The rising or falling of fraud was used as a metric to determine whether politicians and public servants were effective in their roles.
At times, political or business opponents of the government were allegedly targeted by the measures. And some powerful business actors reportedly got around regulations.
Sixth, corruption, as well as infights, conflicts, tensions and power struggles within and between State agencies charged with anti-fraud measures, featured too. One example was Kenya Bureau of Standards. In recent years, several managing directors of the bureau were accused of graft.
The seventh feature was that many anti-fraud measures were implemented by specialised forprofit private actors. They were, therefore, arguably shaped by business interests, competition for anti-fraud measure contracts, and the dynamics of industries and markets.
We also found that international companies specialising in regulations and standards often played a role. Such commercially-oriented actors were particularly active in promoting the proliferation of anti-fraud measures.
Eight, arrests, confiscation and destruction of items were widespread in reports about antifraud activity.
Ninth, we noticed a prevalence of anti-fraud measures in efforts to increase tax revenue and inhibit illicit financial flows. Various initiatives emphasised the need to increase compliance.
At times, we detected tensions in moves to create an “enabling” business environment to attract foreign investment — such as low taxes — and calls to protect the national tax bases.
We found there was international cooperation and the involvement of civil society actors in efforts to address tax evasion and transnational money laundering. One example was the Tax Justice Network.