The complexities of measuring fraud and corruption in Kenya

Fraud and corruption fall under economic crimes, which are typically perpetrated by professionals. [iStockphoto] If you were to approach a random person on the bustling streets of Nairobi and inquire about the pervasiveness of corruption in Kenya, it is highly likely that they would respond with a resounding "yes." Similarly, business executives would readily acknowledge that fraud poses a significant challenge. However, many individuals would struggle to provide a concrete basis for their assertions, often relying on commonly repeated media anecdotes. Both fraud and corruption fall under the umbrella of economic crimes, commonly known as white-collar crimes, which are typically perpetrated by professionals. These crimes hinge on deception and secrecy as opposed to physical violence. The non-public and non-violent nature of economic crimes makes them challenging to measure, and their visibility is limited. Often, only the perpetrators are aware of the crimes being committed. Nevertheless, the effects of such crimes, such as declining profits, poor service delivery, and shoddy work are readily visible. One of the key challenges in measuring economic crime lies in its definition. It is not always clear what qualifies as a crime and what does not. An act is considered criminal if it contravenes specific laws. However, there are acts, such as favouritism, that may not be legally defined as crimes but still cause social harm. This challenge becomes particularly evident when examining corruption. Different societies may have varying perspectives on what constitutes corrupt behaviour, and there is a lack of a universally accepted definition for the term "corruption." Transparency International (TI) defines corruption as the abuse of entrusted power for personal gain, while the World Bank defines it as the misuse of public position for personal gain. The Anti-Corruption and Economic Crimes Act in Kenya does not explicitly define the term "corruption" but rather lists the offenses that constitute it. Similarly, the UN Convention Against Corruption does not offer a precise definition. In its most recent National Ethics and Corruption Survey, the Ethics and Anti-Corruption Commission (EACC) adopts a definition that considers corruption as the offering or granting of something of value to a public officer in exchange for action or inaction. It is worth noting that, except for the TI definition, the other definitions mentioned above imply that corruption can only be perpetrated by public officials. This perception has led to the exclusion, from public discourse, of corrupt behaviour and actions within the private sector. Consequently, corruption that does not involve public officers is rarely measured. Despite the challenges inherent in measuring economic crime, doing so is crucial as it directs attention towards combating this vice. Failing to measure and report on fraud and corruption leads to indifference, resulting in insufficient investments in tackling these issues. Effective efforts to combat economic crime require the establishment of a baseline against which the success of anti-fraud and anti-corruption initiatives can be measured. Failing to measure and report on fraud and corruption leads to indifference, resulting in insufficient investments in tackling these issues. [iStockphoto] There are three common approaches to measuring fraud and corruption. The first involves assessing the extent to which individuals have personally experienced instances of fraud or corruption. These measures, often referred to as victim surveys, aim to determine the percentage of survey participants who have fallen victim to economic crimes (prevalence). The PwC Global Economic Crime Survey (PwC GECS) is an example of such a measure, aiming to establish the prevalence of economic crime victimisation. Victim surveys are more effective in capturing instances of fraud rather than corruption. In the case of corruption, victims may be unaware, while perpetrators are unlikely to admit their involvement truthfully. As a result, corruption is more commonly measured using the second approach, which involves perception surveys. These surveys seek to gauge a population's general perception of corruption. The TI Corruption Perception Index (CPI) is perhaps the most well-known corruption perception survey. However, perception surveys also face certain challenges. Respondents, typically the general public, are more likely to be aware of and experience petty corruption. Consequently, their perception of corruption primarily reflects petty instances, although the results are often taken as a proxy for the prevalence of grand corruption. Countries like Kenya, where petty corruption is widespread and extensively reported in the media, are likely to report higher perceived prevalence. On the other hand, ordinary citizens in regions such as Europe, where the Police Service is consistently rated as the least corrupt institution, may not experience corruption on a day-to-day basis, yet grand corruption may exist unbeknownst to them. Surveys such as the EACC National Ethics and Corruption Survey aim to measure both the experience and perception of corruption. While this approach may seem more comprehensive, it still possesses limitations inherent in both types of measurement. Furthermore, experience and perception surveys often focus solely on measuring the extent or frequency of economic crimes and rarely delve into the associated costs or impacts. This leads us to the third and least common method of measurement: Value measurements. Value measurements involve quantitative surveys that seek to determine the financial losses incurred due to fraud or corruption. In the case of fraud, this is typically done on a case-by-case basis during investigations aimed at quantifying the total value lost in specific fraudulent activities. Surveys such as the PwC GECS then aim to consolidate this data by asking participants about the monetary losses suffered in their most significant fraud cases. However, when it comes to corruption, value measurements are extremely rare. Although numerous estimates and figures are often cited, finding a large-scale, verifiable survey that accurately quantifies the annual cost of corruption is exceedingly challenging. Given the consensus among existing surveys - such as the TI CPI, EACC National Corruption and Ethics Survey, and PwC GECS - that economic crimes are rampant, it is high time for a comprehensive value measurement survey of the cost of fraud and corruption to be commissioned. The results of such a survey are likely to jolt us into action and facilitate more effective anti-fraud and anti-corruption initiatives.

The complexities of measuring fraud and corruption in Kenya

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