The changing global fraud landscape

23.05.2019

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While wrongdoing has always been part of human nature, its forms are constantly evolving. Katie Hodson, Head of Investigations at the Office of the Inspector General, constantly studies that evolution to ensure the Global Fund can protect its assets and reputation.

Five years ago, most allegations we received related to procurement fraud, covering issues ranging from the supply of counterfeit, substandard bed nets, to the procurement of substandard condoms, to non-competitive tender process involving forged documents.

Today, we receive far fewer allegations of product-related procurement fraud. A positive contributing factor to this significant decline has been the introduction of the Global Fund’s pooled procurement mechanism, which aggregates orders on behalf of grant recipients, negotiating prices and delivery conditions with manufacturers on their behalf.

As a result, fraudsters are forced to look towards areas where controls may be less stringent. In Africa, strong market demand for self-medication has led our investigators to look into weaknesses in in-country supply chains, for instance looking at whether drugs may be disappearing from warehouses, or whether government distribution mechanisms are secure.

In recent years, we have also followed up allegations of training-related frauds, looking for irregular expenditures on workshops or other training sessions. Training fraudsters may misrepresent venue costs, daily subsistence allowances, stationery or fuel expenses; they may make false travel claims, and may over-state the number of people who attended a session. We also hear allegations of per diems and honoraria being paid to employees who hadn’t really attended training events.

Per diem fraud can also exist within the framework of conducting data surveys, or in meeting and advocacy-related per diems, and can form part of a larger scheme to embezzle larger amounts of money. If not tackled, this could lead to training, outreach and other programmatic activities not being undertaken, meaning money is diverted from saving lives to personal gain.

Embezzlement by people who have access to funds is a perennial form of fraud. With the rise of mobile payment systems, we have been looking into schemes such as diverting money from an organisation’s mobile money account to personal accounts, and the Global Fund Secretariat has recently developed standard operating procedures for the management of mobile money systems.

A new form of fraud is around data falsification. The Global Fund frequently pays for health surveys to be conducted in order to acquire up-to-date information, and uses this data to design and implement programs which deliver the highest possible impact. Our investigators analyse whether health survey data might have been fabricated, rather than acquired correctly. It’s important we do this, because if health survey data is falsified or inaccurate, patients in need of medicines and services may not receive them, and a program’s progress may be misrepresented.

Around the world, we hear allegations of ‘salary kickback’ schemes, where employees are coerced into surrendering part of their earnings, suffering retaliation if they resist or are unable to pay. We have heard of senior staff collecting up to 40% of the salaries and per diem payments from employees who feared losing their jobs if they refused to pay.

As long as wrongdoing remains part of human nature, investigators will need to keep monitoring and adapting to the changing fraud landscape. If you’d like to learn more about common fraud schemes, visit the OIG’s dedicated e-learning website, www.ispeakoutnow.org.