Corruption in the Wake of Catastrophe

When tragedy strikes, fraudsters are never far behind. Raising awareness of post-disaster corruption is one way to fight it argues Madelaine Drohan.
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December 9, 2013
Madelaine Drohan
Canada correspondent for The Economist, Author of The 9 Habits of Highly Effective Resource Economies, and contributor to The Economist Intelligence Unit

The corruption that accompanies natural disasters is a delicate issue to raise in the wake of the typhoon that smote the Philippines in early November, killing at least 5,700 and displacing millions. No one wants to think that people are anything but good-hearted in the face of so much human suffering. Yet past experience tells us that whenever large sums of money start flowing, some people will find a way to tap into them, regardless of whether they were affected by the storm, tsunami, earthquake or flood that destroyed their neighbours lives and livelihoods. And as today (December 9th) is International Anti-Corruption Day, it’s worth observing that unless the issue is addressed head on, at least some of the estimated US$5.8 billion to be spent on relief and reconstruction in the Philippines will not reach the people who really need it. This holds true for the untold millions that are spent responding to disasters around the world every year.

The Philippines, ranked 94th out of 175 countries on Transparency International’s latest corruption perception index, was already at risk before the typhoon struck because preexisting corruption meant that some homes and infrastructure were substandard owing to the lackluster enforcement of building codes, and powerful politicians had already created channels to siphon off money meant for poverty alleviation.

Yet it would be wrong to think of post-disaster corruption as something that just happens in developing countries, where government accountability is often weak. The Government Accountability Office in the United States estimated in 2006 that of the US$6 billion in government relief payments dispensed following Hurricanes Katrina and Rita, an astonishing US$1 billion was lost to fraud. In Canada, in the wake of the 2013 floods in southern Alberta, the Better Business Bureau issued a warning about fake charities that were soliciting donations, taking advantage of people’s emotional need to do something to help.

Fake charities represent only the first of three phases of post-disaster corruption but they are the most difficult to combat because they can spring up half a world away from where the disaster has struck. Thirty charity websites were created within 48 hours of a devastating tornado in Oklahoma last May; of those, only three appeared to be legitimate according to, a U.S. group which monitors domain name activity. A year after Hurricane Katrina hit, the FBI estimated 4,000 fake websites had been set up. Canada has government agencies and private bodies, such as the Canadian Anti-Fraud Centre and the aforementioned Better Business Bureau, which try to stay on top of scams of all types (the BBB is currently running a 12 Scams of Christmas warning). Yet fraudsters setting up fake websites, sending out phishing e-mails, or knocking at your door have speed and emotion on their side.

Aid delivery is the second phase where efforts to help are vulnerable to corruption. Fake beneficiaries take advantage of the chaos to make claims, while real beneficiaries can exaggerate losses. Peter Dent, a Deloitte partner who has worked in 30 countries helping governments prevent post-disaster fraud, says Desima James of the U.S. is the poster child for the former type of corruption. In a period of a few months in 2005, Mr. James claimed to be a victim of Hurricane Katrina in Louisiana, Hurricane Rita in Louisiana and Texas, Hurricane Wilma in Florida, severe storms and flooding in New Hampshire, and a tornado and severe storms in Indiana. He received more than US$30,000 in disaster assistance from the U.S. Federal Emergency Management Agency.

The third and final phase is reconstruction, when money pours in to rebuild ruined houses, buildings and infrastructure. Here the opportunities range from inflating contracts and using substandard materials to officials accepting bribes to award contracts to certain firms or directing work to friends and relatives. Given the amounts at stake, such corruption can be quite lucrative.

Now, before you decide never to donate to disaster relief again, consider that governments and humanitarian agencies are increasingly aware of and actively trying to combat post-disaster corruption. And they have had some success.

Under the aegis of Transparency International, humanitarian groups have put together a handbook on how to recognize and address corruption. (The 2010 version is currently being updated based on lessons learned in more recent disasters.)  They are working far more closely together in delivering aid than they have done in the past, both with each other and through the UN Office for the Coordination of Humanitarian Affairs.[1] John Uniak Davis of CARE, who worked on the handbook, says two disasters – the 2004 tsunami in the Indian Ocean and the conflict which began in 2003 in Darfur – sparked a lot of thinking about how aid groups and agencies could reduce the risk of corruption and improve co-ordination.[2]

Governments too are more alive to the risk of disaster relief funds going astray. According to Mr. Dent, the U.S. has developed a sophisticated system for registering claimants and ensuring they are genuine. It makes this system available to other countries that have experienced a disaster, although not all governments are willing to use it. Technology, which helps fraudsters prey on well-meaning donors by setting up fake websites, can also help governments and humanitarian groups combat corruption when they use it to co-ordinate their efforts and compile and share information. The government in the Philippines, well aware of its poor reputation on corruption, has set up the Foreign Aid Transparency Hub, a website to show where relief funds are coming from and where they are going.

Technology also allows the public at large to lend a hand in these efforts. Following the typhoon, maps were generated using public input on where the storm hit hardest – so those areas where relief efforts should be concentrated – and also where various relief agencies are located.

The final line of of attack is tracking down fraudsters after the disaster and bringing them to justice. The FBI is still prosecuting people for corruption committed during Hurricane Katrina more than eight years ago. The long list of charges and convictions on its website makes for sobering reading. Mr James, the multi-disaster relief claimant is there. He was ordered in 2010 to repay US $33,734 and sentenced to almost three years in prison.

[1] Interview with John Uniak Davis of Care in July 2013

[2] Interview with John Uniak Davis of Care in July 2013