04 Jan Chasing Fraud and Profit
By Nataliya Mykhalchenko
In recent years, fraud – an intentional deception made for personal gain or to damage another individual – has increasingly penetrated various sectors of the global economy. Public and private actors are extensively undertaking anti-fraud measures in the Global North and in the Global South. Some interesting trends are emerging as part of this, as has been referred to by some actors it could be seen as a ‘war on fraud.’ An examination of articles published about anti-fraud measures in the past years in various online newspapers from Tanzania, South Africa, Ghana, Malawi, Kenya and Rwanda suggests that the existing anti-fraud initiatives may be only addressing the symptoms rather than the root causes of the fraud phenomena.
Economic fraud, ranging from fake mobile phones, medicine and garments, to tax fraud and bank fraud has serious negative implications for the economic system of the country. Tax fraud especially, harms the well-being of a country, with millions of dollars lost every year. Moreover, fraud causes substantial loses for individual companies. It is not surprising then that although state actors are pursuing some anti-fraud activity, private actors, both from the Global North and the Global South emerge as leaders in the anti-fraud sector. Private actors are especially active in the banking and insurance sectors, electronics, pharmaceuticals and in the energy sector. Anti-fraud activity initiated by these actors widely employs technology and popularisations campaigns to safeguard the respective brands and financial institutions from counterfeits, substandard products and tampering with financial transactions.
In the banking sector for instance, technology is used to protect financial transactions by securing credit cards with new chip technology. Such initiatives often require customers to reveal personal information, and in some instances even biometric information. This, as claimed by some, will make financial transactions more secure and will help acceleration into cashless-societies. In the pharmaceuticals, electronics and in the garment industry, technology is used to check for authenticity and often require the participation of customers. Various incentives, such as free warranties, phones and textiles reward consumers for part-taking in such initiatives. Here, brands ‘empower’ costumers to play a role in protecting themselves from fakes; and at the same time, this creates an image of a reliable and a safe brand, that cares for their customers. Market, consumer, and brand concerns are evident in such initiatives.
A trend worth noting is increased activity of specialist companies, including those from the North as part of this ‘battle on fraud.’ Companies such as the Association of Certified Fraud Examiners (ACFE) are especially active on the African continent. ACFE is the world’s largest anti-fraud organization and a provider of anti-fraud education, training and certification. It widely pursues awareness raising and educational campaigns to popularize the anti-fraud sector. Other companies, especially those from the North, that offer technological solutions for fighting fraud also stand out. These companies mainly offer computer software and other technical support. In some instances international organisations also push for the anti-fraud initiatives. For example, the Human Development Innovation Fund (HDIF) and UK’s Department for International Development (DFID) awarded a grant to a profit-making company Sproxil (a provider of innovative brand protection) in helping to expand the company’s business in Tanzania and to educate consumers about the health risks associated with counterfeit products (Taylor, 2015). The ‘Mobile Product Authentication’ – Sproxil’s anti-counterfeiting service – allows consumers to differentiate between fake and genuine products through the use of a mobile phone. The marriage between the HDIF, DFID and the American private company Sproxil suggests a joint interest of state and capital in, amongst others, promoting this product on a new market, and thus, expanding returns on the business. It is not yet clear what role the Tanzanian people and the state are to play in such a deal.
While ‘technological fixes’, such the one mentioned above, could be effective in theory, in practice they seem to be only masking the problem rather that addressing the root causes. Recent research (Wiegratz, 2012; 2015) reveals that more examination of the neoliberal restructuring that took place in many African countries is needed to understand the often high level of fraud in these societies. Based on his research in Uganda and elsewhere, Wiegratz argues that the moral-economic and interrelated political-economic aspects of neoliberalism have contributed to the routinisation of fraud across many societies. The question that needs to be asked then, is whether the current nature of the anti-fraud activity addresses the root causes of the fraud phenomenon. Can a technological solution, which can be breached by more sophisticated technology, address an issue that is more deeply embedded in social and political aspects of the economic system?
As was noted by Tombs and Whyte (2009), fraud is inherently liked to the issue of power. The examination of the newspaper articles reveal that power struggles are indeed a feature of the anti-fraud activity. In some instances political connections are used to influence the running of investigations, revealing that some initiatives have a particular political character, where power capacities of various actors allegedly linked to fraud, amongst others, influence who is prosecuted and who is not. This suggests that power plays a role in shaping the dynamics of the anti-fraud measures.
What is also worth noting is the fact that the anti-fraud sector is becoming a money making terrain. This can put the integrity and the effectiveness of the anti-fraud activity into question. The analysis of the identified initiatives suggests that a business impetus characterises and drives some anti-fraud initiatives across the examined countries. If we consider the research findings of the above mentioned academics, then we could ask whether the repercussions of neoliberal restructuring (which normalise fraud) could in fact be profitable for those, who according to the official narrative, aim to tackle fraud. To put more simply, does the profit motive of the anti-fraud ‘warriors’ in fact thrive on the very existence and increase of fraud? Here one can draw a parallel with the pharmaceutical industry, where some have argued that it is in fact not profitable for large companies to release drugs that can cure certain diseases permanently, because it is simply more profitable to continue treating the symptoms of the illness. Is the anti-fraud sector under the risk of deteriorating into something similar? Is it the case that is it in fact not profitable to permanently contain fraud?
To conclude, further enquiry is needed regarding motivations that drive measures, especially those resulting in financial gain. Understanding the role of power relations in shaping and influencing the anti-fraud sector is another aspect needing research. While it is not yet clear what effect, if any, the current anti-fraud activity is having on levels of fraud, the above discussion suggests that the instrumental nature of the measures risks masking rather than addressing the issue. This may well be because it fails to challenge the economic system that creates conditions for its very existence.
Nataliya Mykhalchenko is a third year International Development student at the University of Leeds. Her project was on the political economy of anti-fraud measures in Africa and is informed by the ongoing research of Dr. Jörg Wiegratz on anti-fraud measures in Uganda.
Taylor, P, 2015. UK funding will help Sproxil enter Tanzanian market. Securing Industry. Available at: http://www.securingindustry.com/pharmaceuticals/uk-funding-will-help-sproxil-enter-tanzanian-market/s40/a2305/#.VlzAGHbhDIU
Tombs, S. and Whyte, D., 2009. The State and Corporate Crime. In: Coleman, R and Sim, J and Tombs, S and Whyte, D, eds State, Crime, Power. Sage: London.
Wiegratz, J., 2015. The New Normal: Moral Economies in the ‘Age of Fraud’. In: Whyte, D., ed. How Corrupt is Britain?, London: Pluto
Wiegratz, J., 2012. The neoliberal harvest: the proliferation and normalisation of economic fraud in a market society. In: Winlow, S. and Atkinson, R., eds. New directions in crime and deviancy, London: Routledge