The Costs of a Culture of Corruption – It’s More Than Money

As we shared in our “Culture of Corruption” webinar recently, we are seeing a tremendous increase in high-profile corruption cases ensnaring governments, companies, individuals, and financial institutions. Unfortunately, from all available evidence, there are likely to be even more high profile cases uncovered before things get better, as global investigators unwind the shady dealings of the last few decades.

From pharmaceutical misdeeds in China, to bribery and corruption scandals at petrochemical companies in Africa and Brazil, contract-steering related to defense companies in the Middle East, and even healthcare fraud in the United States, the scale and money involved in corporate corruption is mind boggling – estimated to be $1 trillion a year globally.

Outside of the obvious financial impact, how else does corruption affect society? From environmental concerns, to healthcare, and even sports events, corruption touches nearly every aspect of our lives.

  • Environmental – South East Asia “haze”: For anyone who may have visited Singapore or Malaysia this year, you might have participated in the never-ending discussion around air pollution coming from forest fires burning in Indonesia. These fires are an annual event in Indonesia related to the mass clearing of fields for farming and other purposes. However a recent study demonstrates a link between political corruption and the worsening of these fire events. Every election year in Indonesia, the pollution reports from burning increase dramatically due to local political leaders giving out land rights ahead of elections to curry favor. In turn, the region has seen Air Quality Indexes (“AQI”) of nearly 2,000 where the burning occurs (200 is considered “heavily polluted”).
  • Sports – The Russian Track and Field Team: Substance abuse has always been an issue within international athletic sports. Despite large- scale global efforts to standardize and clean up amateur sports, a recent report out of Russia identified that a significant portion of the Russian Track and Field team were abusing banned substances. However, the international testing agency WADA determined that a Moscow-based lab was charging 50,000 Ruble bribes to hide positive tests for banned substances. Once the bribe was paid, the lab would cover up the discovery of the substances allowing the athletes to continue competing. Think of the ripple effect this type of corruption has on the sports community and reputations of the participants.
  • Health – Access to basic infrastructure: Over the past decade, Nigeria has become one of the leading examples of economic prosperity in Africa, largely through tremendous expansion of its oil and gas reserves. Despite this success, Nigeria was still receiving millions of dollars in aid monies for impoverished areas. The funding was to be directed to basic necessities – so that millions of Nigerians could have running water, electricity, and proper drainage. Earlier this year however, the Nigerian government was swept from office by a rising party who campaigned chiefly on eliminating corruption. One of the first changes was to disallow government officials to process government checks through their personal bank accounts. Upon taking office, the new government estimated that nearly one-third of the Nigerian GDP had disappeared over the past decade due to siphoned funding and corruption.

As we can see, corruption can lead to significant impact – not only on peoples’ financial situations, but also in terms of general quality of life, healthcare management, and fairness in competition. It is imperative that governments and regulators continue their push for transparency to ensure that monies allocated to causes relating to the poor and needy actually do make it to those sources and are not skimmed off into someone’s personal bank account. The news has been increasingly positive in the last 12 months, but there is still a long way to go.

 

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