When Humanitarians Defraud Those in Need

According to recent data from the United Nations High Commissioner for Refugees (UNHCR), 79.5 million people around the world were forcibly displaced at the end of 2019. That means 1% of the world’s population are currently refugees. With so many people in need of aid, the work of charitable organizations is more necessary than ever. Unfortunately, aid organizations can prove ripe targets for fraudsters.

In his session, “Wolves in Sheep's Clothing: Humanitarian Fraudsters,” at the virtual 31st Annual ACFE Global Fraud Conference, Perry Metaxas, CFE, shared how fraudsters take advantage of aid organizations. Metaxas is a former senior Intelligence Officer in the Canadian Department of National Defense and recently retired Senior Investigations Officer with the Inspector General’s Office for the UNHCR.

One story he shared with attendees was about an executive director of an implementing partner for UNHCR in Uganda. She was highly regarded in society and made a point to stress Christian values to her staff — including the importance of doing what was right. However, while she publicly said that, she was misappropriating assets meant to help refugees. She used vehicles that were only authorized for aid use to make personal trips, including repeated trips to her hometown that was four hours away from the site. She also allowed her staff and family to use the vehicles as they wanted.

One of her duties was approving refugee requests for direct financial aid. A list of names would be compiled by a staff member and then she would sign off for authorization. However, the staff member compiling names happened to be the director’s niece and the names on the list were fabricated. Other staff members would sign phony signatures next to each name and be paid $12 per signature.

Other schemes the director ran included approving inflated staff lunch catering prices since the catering provider was related to the financial officer of the organization. She used money set aside for refugee health needs for her own family members. After some time, all culpable parties, including the director, were investigated and fired.

Metaxas said there are four key contributing factors to fraud in aid organizations: a culture of skepticism, a culture of urgency, a lack of a segregation of duties and position planking.

Culture of skepticism

Metaxas explained that humanitarian aid workers tend to be natural providers, so they find it hard to believe that their colleagues could be self-serving. “This cultural skepticism is the Achilles heel when it comes to taking a hard, critical look at any of the humanitarian organizations,” he said. He also explained that companies fear the negative outcomes that could arise after acknowledging fraud within their organizations. “[They have the fear] that talking about corruption could undermine public support for aid by donor countries, discredit the organization, as well as impact local aid relations and increase tensions in societies.” Luckily, he said, this cultural skepticism is starting to shift to acceptance of reality.

Culture of urgency

Aids agencies often work in countries where existing institutions are weak and there is a history of corruption. The agencies are expected to directly manage the distribution of finite and valuable resources without the help of the host government. There is also a strong pressure to distribute aid quickly, which leads to providers taking shortcuts and undermining their own internal procedures that are in place to prevent fraud. To add even more strain, the people receiving the aid can be hard to reach, and aid providers may lack local knowledge. “All of these conditions exasperate the existing corruption risk factors that agencies face,” he said.

Lack of segregation of duties

Metaxas told attendees that the three main duties of aid organizations are the custody, authorization and record keeping of assets. They need to acquire resources, store them, figure out who needs them, distribute them and make sure it’s all documented. When operating in volatile areas with rotating staff under strict time constraints, it’s too common for agencies to rely on one person to do multiple tasks and sign off on more than one area of authorization. “This can be overcome by detailed contingency planning,” he said. He recommended that aid organizations document and distribute specific exemptions for many common scenarios, so that there’s still a clear path of how to move forward with some controls when the normal protocol has to change.

Position planking

In aid agencies, international staff are usually rotated every two to five years, but the local or national staff often remain in their positions for their entire career. Metaxas said that when staff work in a specific position or area for a long enough time, they often become the gatekeepers. They may be the only people that a vendor will work with or are the only person that has some type of important knowledge. In turn, they are at a higher risk for becoming corrupt.

While these weak points are cause for concern in humanitarian aid, Metaxas did stress that organizations are becoming more aware of their fraud risks and actively trying to mitigate them. Because while all fraud is harmful, it is especially harmful when it deprives people of the resources they need to survive.