An analysis of measures to combat the risk of economic crime associated with post-disaster funding in South Africa
| Date | 10 July 2024 |
| Pages | 369-388 |
| DOI | https://doi.org/10.1108/JFC-03-2024-0114 |
| Published date | 10 July 2024 |
| Author | Nina Du Toit,Philip Steenkamp,Andre Groenewald |
An analysis of measures to
combat the risk of economic crime
associated with post-disaster
funding in South Africa
Nina Du Toit,Philip Steenkamp and Andre Groenewald
School of Accounting Sciences, Faculty of Economic and Management Sciences,
North-West University, Potchefstroom, South Africa
Abstract
Purpose –The purpose of this paper is to analyse the measuresthat could be taken to combat the risk of
economiccrime in the aftermath of South African disasters.
Design/methodology/approach –This paper used secondary sources including, but not limited to,
institutionalreports, newspaper articles and peer-reviewedacademic journal articles.
Findings –The COVID-19 pandemic was usedas an example in this paper to discuss thesusceptibility of
post-disaster funding to the risk of economic crime and to assess how the South African government
attemptedto combat this risk during the pandemic. The Auditor-Generalof South Africa (AGSA) conducted a
real-time audit of the government’sessential COVID-19 initiatives in collaborationwith the newly established
Fusion Centre. Throughtheir collaborative efforts, they successfully identified mismanagedfunds, facilitated
the recovery thereof and prosecutedindividuals and entities involved. This paper found that to proactively
combat economic crime in future post-disaster events, the collaborative use of the AGSA and the Fusion
Centre, in conjunction with existing bodies established under the Disaster Management Act, should
be considered.
Originality/value –This paper contributes to the body of knowledge in disaster risk management and
forensic accountancy.As the frequency of disasters is expected to increase in the future, so willthe economic
crime risk associated with post-disaster funding. This paper demonstrates that post-disaster funding is
especially susceptible to the risk of economic crime and it is therefore important to research methods to
combat this problemand prevent further losses.
Keywords Economic crime, COVID-19 pandemic, Auditor General South Africa, Fusion Centre,
Post-disaster funding
Paper type Literature review
1. Background to global disasters
Ant
onio Guterres, the secretary-general of the United Nations, stated in the 2022 Global
Assessment Report on Disaster Risk Reduction that: “Nothing undermines sustainable
© Nina Du Toit, Philip Steenkamp and Andre Groenewald. Published by Emerald Publishing
Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) license.
Anyone may reproduce, distribute, translate and create derivative works of this article (for both
commercial and non-commercial purposes), subject to full attribution to the original publication and
authors. The full terms of this license may be seen at http://creativecommons.org/licences/by/4.0/
legalcode
Economic
crime
369
Journalof Financial Crime
Vol.32 No. 2, 2025
pp. 369-388
EmeraldPublishing Limited
1359-0790
DOI 10.1108/JFC-03-2024-0114
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
development like disasters. They can destroy decades of progress in an instant”[United
Nations Office for DisasterRisk Reduction (UNDRR), 2022, p. ix].
Notwithstanding commitments to increaseresilience, fight climate change and establish
pathways for sustainable development, existing societal, political and economic decisions
are accomplishing the opposite [United Nations Office for Disaster Risk Reduction
(UNDRR), 2022, p. ix]. Human actions keep pushing the world to its ecological and
existential boundaries and risk mitigation efforts frequently appear to be too little and too
late [United NationsOffice for Disaster Risk Reduction (UNDRR), 2022, p. ix].
In addition to the human, material, economic and environmental losses and damages
caused by disasters, allegations of fraud and corruption often emerge, which brings about
added consequences [Kratcoski and Edelbacher, 2018,p.139;United Nations Office for
Disaster Risk Reduction (UNDRR), 2022,p.2].AccordingtoFenner and Mahlstein (2009,
p. 241), certain industries, types of transactions or events have been proven to favour fraud
and corruption more than others, and this is particularly true in disaster circumstances.
Disaster circumstances triggera massive humanitarianresponse that necessitatesimmediate
actions and results in a rapid and largeinjection of money, goods andservices into a country
(Fennerand Mahlstein, 2009,p.241).
This paper will outline measures thatcan be taken to combat the risk of economic crime
following South African disasters. This will be achieved by analysing the measures
implemented by the Auditor-General of South Africa (AGSA) to identify the risk of
economic crime during the COVID-19 pandemic and its subsequent collaboration with the
Fusion Centre to investigate and recover funds misappropriated during the COVID-19
pandemic.
1.1 Global impact of COVID-19
According to the World Health Organisation (2023), the COVID-19 pandemic was a global
epidemic of coronavirus,an infectious diseasebrought about by the severe acute respiratory
syndrome coronavirus 2. The first COVID-19 cases initially emerged in China in December
2019, but quickly spread to the rest of the world (WHO, 2023). Consequently, this prompted
the WHO to declare a Public HealthEmergency of International Concern on 30 January 2020
and to classify the worldwide outbreak as a pandemic on 11 March 2020 (WHO, 2023)
Following this declaration,numerous countries invoked emergency laws todeclare a state of
emergency in response to the COVID-19outbreak (Du Plessis et al., 2022, p. 901).
While the implementation of these states of disaster aimed to curb the spread of
COVID-19, these measures have, however, incre ased the global risk of economic crime
(Leighton-Daly, 2022). The direct government involvement in nation al economies has
resulted in large sums of money being poured into local initiatives that fraudsters have
used to their advantage (HLB International, 2023). This is supported by the 2022 PwC
Global Economic Crime and Fraud Survey [PricewaterhouseCoopers (PwC), 2022,p.7]
which found that in 2022, 70% of the survey participants experienced new fraud types
due to the COVID-19 pandemic.
This increase in economic crime has caused numerous countries to suffer substantial
financial losses. To illustratethis point, the UK incurred financial losses of more than £21bn
in public funds due to fraudulent activitiesin the two years following the outbreak (National
Audit Office, 2023). Similarly, the USA incurred financial losses amounting to over $403bn
attributable to the COVID-19pandemic (Lardner et al., 2023).
The United Nations Office on Drugs and Crime (UNODC) (2022, p. 1) noted that the
urgency to address the consequences of the global pandemic, coupled with the quick
implementationof relief measures, led to insufficient accountability and oversightprocesses.
JFC
32,2
370
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