Analysing the characteristics of post-disaster funding that make it susceptible to the risk of economic crime: a South African frame of reference
| Date | 19 July 2024 |
| Pages | 304-320 |
| DOI | https://doi.org/10.1108/JFC-03-2024-0099 |
| Published date | 19 July 2024 |
| Author | Nina Du Toit,Philip Steenkamp,Dewald van Niekerk,Andre Groenewald |
Analysing the characteristics of
post-disaster funding that make it
susceptible to the risk of economic
crime: a South African frame of
reference
Nina Du Toit and Philip Steenkamp
School of Accounting Sciences, Faculty of Economic and Management Sciences,
North-West University, Potchefstroom, South Africa
Dewald van Niekerk
Unit for Environmental Sciences and Management, Africa Centre for Disaster
Studies, North-West University, Potchefstroom, South Africa, and
Andre Groenewald
School of Accounting Sciences, Faculty of Economic and Management Sciences,
North-West University, Potchefstroom, South Africa
Abstract
Purpose –Research indicates a significant riskof economic crime associated with post-disaster funding.
The purpose of this paper is to assessthe characteristics of post-disaster funding thatmake it susceptible to
the risk of economic crime and to analyse how the statutory and regulatory disaster risk management
instrumentsof South Africa aim to manage post-disaster events.
Design/methodology/approach –This paper uses secondary sources such as, but not limited to,
legislation,institutional reports, textbooks andpeer-reviewed academic journal articles.
Findings –Post-disaster funding is inherently susceptible to economic crime due to characteristics
identified such as time pressure; substantial inflow of money, goods and services; inadequate needs
assessment, large-scalereconstruction and the involvement of contractorsor suppliers; powerimbalance; and
the responsibility of governments. The Disaster Management Act and National Disaster Management
Framework provide an extensive regulatory framework for mitigating post-disaster funding risks by
attempting to find a balancebetween quick aid distribution and financial controls. This paperfinds that even
though South Africa is known to havesome of the best disaster risk management laws, the pervasive nature
of the characteristics could still render post-disaster funding structures susceptible to the risk of economic
crime.
Originality/value –There is limited scientific research on thistopic. The expected prevalence of future
disasters requires the regulatory and legislative disaster risk management instruments to evolve
© Nina Du Toit, Philip Steenkamp, Dewald van Niekerk and Andre Groenewald. Published by
Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC
BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this
article (for both commercial & non-commercial purposes), subject to full attribution to the original
publication and authors. The full terms of this licence may be seen at http://creativecommons.org/
licences/by/4.0/legalcode
JFC
32,2
304
Journalof Financial Crime
Vol.32 No. 2, 2025
pp. 304-320
EmeraldPublishing Limited
1359-0790
DOI 10.1108/JFC-03-2024-0099
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
concomitantly.Research on this topic must continueto ensure that risks associated with post-disasterfunding
and its susceptibilityto economic crime can be mitigated as far as possible.
Keywords Economic crime, Post-disaster funding, Disaster risk management, Disaster
Management Act, National Disaster Management Framework, South Africa
Paper type Literature review
1. Introduction
According to Kunguma et al. (2021, p. 1), disasters have become more frequent on both a
global and local scale. Between 1970 and 2020 the averagereported amount of medium- and
large-scale disasters grew from 90 to 500 annually, whereas 387 global disasters were
recorded in 2022 (EM-DAT, 2022, p. 4; UNDRR, 2022, p. 17). South Africa also experienced
various disasters in recent years, which included the 2007/2008 drought, the Knysna veld
fires in 2018, the COVID-19 pandemic in 2020 and the KwaZulu-Natalfloods in 2022 (Lippke
and Wangare, 2022;Mashigo,2023;Ngaka, 2012,p.1;Roelf,2020).
According to Calossi et al. (2012, p. 652), disasters trigger a complex series of events
which involve a wide variety of institutional and societal role-players. Emergency
conditions following disasters often necessitate an immediate humanitarian response to
provide relief to those affected.A considerable amount of funds and resources are gathered,
transferred, allocated and dispersed during the post-disaster funding process, which
involves numerous international as well as national and local organisations and entities
(Calossi et al.,2012, p. 652). Nearly every disasterworldwide has captured the interest of the
media, the general public, national governments and international organisations and as a
result, emergencyfunding and humanitarian aid have increased significantlyin recent years
(Calossi et al., 2012,p. 653).
Humanitarian aid attempts to assist those affected by disasters but numerous incidents
of fraud and corruption are however frequently discovered afterwards (Fenner and
Mahlstein, 2009,p. 241). Although disasters are unlikely to generate corruptionon their own,
instances such as disaster relief windfalls and the abuse ofinternational assistance in post-
disaster circumstances could increase this risk (Zafar et al.,2023, p. 3). For this paper, it is
important to contextualise the different terminology used when referring to fraud,
corruption and economic crime due to their interchangeable use across different legal
jurisdictionsand sources.
Willitts-King and Harvey (2005,p.1)dvefined corruption in the humanitarian context
broadly as “the misuse of entrustedpower for private gain and could include: financial fraud
and embezzlement, misuse of agency assets, theft, diversion, bribes, abusive/coercive
practice”, whereas fraud can be defined as “the unlawful and intentional making of a
misrepresentation which causes actual prejudice, or which is potentially prejudicial to
another”and can include for example bid-rigging, fictitious invoices, bribery, theft, tax
fraud, bankruptcy fraudand insurance fraud (Anti-Intimidationand Ethical Practice Forum,
2019, pp. 1–2).
According to Europol (2022), economic crime can be defined as “illegal acts
committed by an individual or a group of individuals to obtain a financial or
professional advantage”. Economic crime could be understood as an umbrella term
which can include capital investment fraud, misleading customers, fraudulent
bankruptcy, tax evasion, credit and insurance fraud, credit card fraud, cybercrime,
corruption and money laundering. (Kohalmi and Mezei, 2015,pp.36–39; Transparency
International, 2021,p.3).
Characteristics
of post-
disaster
funding
305
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