Believe it or not, this crisis isn’t a zero-sum game. Simple checks won’t slow anyone down, they’ll create transparency, writes John Penrose
The rules and regulations that stop dirty money from being made in ganglands or war zones, and then moved around the world by unscrupulous lawyers or accountants before it’s stashed in crime lords’ respectable retirement funds are a bit of a patchwork quilt, to be honest. Some countries make it hard, but others look the other way.
Yet no matter how tough each country’s rules were before coronavirus struck, life is easier for the criminals now.
Why? Because everyone is cutting corners in the push to save lives, and because there are billions of dollars sloshing around the world in a desperate search for gowns, masks and testing kits. The usual checks on whether sellers own what they’re selling, and whether they really do what they claim – or even exist at all – are being rushed or ignored in the face of mounting deaths and grief.
The number of dodgy deals is reported to be climbing. Different countries are paying billions to firms, some of which only exist on paper, or which didn’t exist a matter of weeks ago. There are contracts for politically-connected cronies to supply coronavirus kit at many times the going rate, spurious coronavirus cures and treatments and tests that don’t work properly, or at all. Any crisis creates fog, confusion and opportunities for criminals and fraudsters so, for them, coronavirus is a once-in-a-generation, global chance to make hay.
A lot of it is understandable. If you’re a public official faced with a mounting death toll, you know you’ve got to move fast. You won’t want to get bogged down in bureaucracy, and you’ll be impatient with pernickety questions from pettifogging internal auditors too. No matter how good or bad your anti-fraud and corruption checks were before coronavirus struck, they will be worse now. Most countries are vulnerable to this temptation, which sober-minded analysts describe as throwing money like water at a fire.
But it doesn’t have to be this way. There are some really quick and simple checks which, even if there’s no time for anything else, will keep public money safe and official reputations intact in a crisis like this one.
The simplest and strongest is to demand every organisation applying for government grants or contracts comes clean about who owns them. That’s not just the company directors, partners or trustees, but the person behind them who owns the shares and calls the shots. The “beneficial owner”. And it’s got to be someone with a pulse; a real person, not another company that’s owned by a partnership which is owned by a trust and so on, in layers of shells like a Russian doll. If you can’t find a real human being when the last shell is opened, you can’t check to see if they’re dodgy. And if they won’t tell you who they are behind all those shells, there’s a pretty good chance they’ve got something to hide. In a crisis, with lives at stake and your personal reputation on the line when the inevitable post-coronavirus enquiries are held, why take the risk?
Equally simple and powerful is the International Monetary Fund’s pithy advice to “spend the money you need to spend, but keep the receipts”. The simple knowledge that there is an audit trail, which means it can and probably will be investigated later by police or journalists or NGOs, is enough to stop most people from giving in to temptation, and prod anyone into doing the right thing. Nigeria and several other countries that are receiving IMF funds have committed to do just this. It’s even more important for countries that get big dollops of aid from the UK and elsewhere, as pointed out by professor Sope Williams-Elegbe of Stellenbosch University, my fellow panelist in a recent webinar on corruption and coronavirus.
The good news is that political leaders and public officials who use these simple, powerful checks, in any country around the world, will have public backing for what they’re doing. People hate the sight of a connected criminal elite living off the proceeds of crime in ordinary times, but in a pandemic the emotions are stronger and rawer than usual. Every penny that’s syphoned off by fraud and corruption means less cash to treat patients and save lives, so the
anger of the public against leaders and officials who are careless or criminal will be huge. But the support for governments that get cash safely to the front line will be equally heartfelt too.
Around the world, people are calling for governments to implement these checks. OpenOwnership, a global NGO that specialises in uncovering those beneficial owners who call the shots, has launched a set of principles that outlines what “good” disclosures look like, to help governments and organisations track the trillions of dollars that have been committed in financial aid by lenders and governments.
So the crisis isn’t a zero-sum game where leaders and public officials can either save lives or avoid fraud, but not both. Speed definitely matters, but these simple checks needn’t slow anyone down. And the cost of not doing them will be many more lives lost to faulty or non-existent equipment, and probably the personal reputations and jobs of the leaders and officials who didn’t bother to do the checks too. The public will rightly want to know where their taxes have ended up, and whether more of their relatives would still be alive if things had been done differently. The stakes could not be higher.
John Penrose, Conservative MP for Weston-Super-Mare and the Prime Minister’s Anti-Corruption Champion, participated in a panel hosted by Open Ownership – an NGO dedicated to confronting corruption by driving the global shift towards transparency regarding who owns and controls companies.