The human impact of financial crime

A skimming device used by criminals in credit card fraud. Cyber criminal activities are on the rise at an alarming rate.

Many of us assume that the cost of financial crime bears directly on the entity that has been defrauded only; this is in fact an untruth. The perpetration of these categories of crime often has far reaching negative implications, some of which are exceptionally severe.

Fraud can be described simply as an unlawful and intentional attempt to relieve one of one’s assets through misrepresentation, while corruption is the offering of an inducement to an official effecting them to act in a way that one would not necessarily act during the routine performance of one’s duties, either to the benefit of the corruptor or the detriment to a third party.

The actual mechanisms used to execute these crimes range from unsophisticated schemes such as amending creditor bank account details or an exchange of cash in lieu of nepotism to more complex accounting frauds such as financial statement fraud involving hundreds of millions of Rands. The majority of the indirect victims of these crimes are ones that receive awfully little attention, particularly in the case of corruption.

For instance, a new assessment of global earthquake fatalities over the past three decades indicates that 83% of all deaths caused by the collapse of buildings during earthquakes occurred in countries considered to be unusually corrupt.

Authored by Professor Nicholas Ambraseys of the Imperial College of London and Professor Roger Bilham of the University of Colorado, the study also found that in some relatively wealthy countries where knowledge and sound business practices would be expected to prevail, the collapse of many buildings is nevertheless attributable to corrupt building practices. The authors determined that there is roughly a one-to-one relationship between a nations’ wealth and its perceived level of corruption.

According to Bilham, less wealthy nations are the most corrupt. Bilham is also a fellow in the CU-Boulder based Cooperative Institute for Research in Environmental Sciences.  The research found that 83% of all deaths from earthquakes in the last 30 years have occurred in nations where corruption is both widespread and worse than expected. Corrupt building practices, which are generally covert and hard to quantify, can include the use of substandard materials, poor assembly methods, the inappropriate placement of buildings and non-adherence to building codes. 

The authors noted that while a 7.0 magnitude earthquake that struck in New Zealand in 2010 resulted in zero fatalities, an identical 2010 earthquake in Haiti resulted in a death toll reaching six figures. Widespread anecdotal evidence points to the collapse of structures in devastating earthquakes as a result of corrupt building practices.

In this study we have attempted to quantify that perception. Corruption is found to be far worse in some countries than others, despite a measure of wealth that tells us they should do better. It is in the countries that have abnormally high levels of corruption where we find most of the world’s deaths from earthquakes.

The global construction industry, currently worth $7.5 trillion annually and which is expected to double in the next decade, is recognized by experts as being the most corrupt segment of the world economy. Since 1980, deaths due to an absence of effective earthquake engineering activity have averaged about 18,300 per year, according to the authors. (Source: Nicholas Ambraseys, Roger Bilham. Corruption kills. Nature, 2011; 469 (7329): 153 DOI 10.1038/469153a) (

As is apparent from the above case study, we see that alleged corrupt transactions may have led to the ultimate transgression, the loss of human life. Fraud and corruption in particular may be considered to be the some of the most inexcusable crimes as the repercussions they are associated with may be staggering.

Many people do not make this association easily. This is due to the fact that they view corruption, and death tolls as a result of natural disasters as entirely extricated from each other. When this in fact may be true in most cases, there are instances where corruption can be indirectly linked to a significant amount of deaths. When we make this association we grasp the actuality that financial crimes are some of the most perturbing crimes we currently face in society.

Craig Mudaly has 16 years experience in the forensic audit and investigation sector. He has worked extensively in large private and public sector forensic audits including large state owned entities, including some of the largest frauds in South African history.