Thursday, June 30, 2022

Enabling big data in anti-corruption fight


There is now a strong push for governments to start using technology to fight corruption. Indeed, technology has much to offer to clean up government operations, but nothing will happen much soon.

Bureaucrats have been known to frustrate such efforts. In the early days of Customs computerization, the computers were sabotaged simply by spilling syrup or other food particles so rats and other pests would chew on the wires and disable the machines.

Then again too, technology can also be used to make corruption easier to do and harder to detect. There are new technologies, including online payment systems, blockchain, and cryptocurrencies – that promise secure anonymity to the criminally inclined.

Still, there is sense in the advice of the IMF for governments to keep pace with evolving technology and opportunities for wrongdoing.

In the IMF paper I wrote about last week, it pointed out that “Our analysis found that when governments invest in information and communication technologies and transparency increases, there are fewer opportunities to ask for bribes.”

IMF cited Chile and Korea where electronic procurement systems have proven to be powerful tools in improving transparency and curtailing corruption.

While we have a Freedom of Information Law and pronouncements from the President to his Cabinet members about being transparent, the situation on the ground is very different. Journalists who try to get information on the basis of FOI are often turned down.

This brings us to the next point of the IMF paper: the role of a free press. “Promoting transparency and a free press helps increase accountability… Our cross-country analysis shows that a free press enhances the benefits of fiscal transparency in curbing corruption.

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“It is not enough to release data; it must also be widely disseminated and explained. In Brazil, the release of the results of audits affected the reelection prospects of officials suspected of misuse of public money, and the impact was greater in areas with local radio stations.”

Technology is being used to create transparency across organizations by increasing automation, accuracy and frequency across processes, the World Economic Forum reports.

“Big data is primarily being employed in the fields of public health, trade and taxation where predictive analysis and visualizations that determine trends, patterns and relationships in massive volumes of data are being used to gain valuable insights.

“An example of this is the Australian Taxation Office using big data to search through vast amounts of records to find evidence of the use of tax havens, and data-matching to identify small online retailers that are not meeting their compliance obligations.”

This is already being done here by the BIR. All expensive car and condominium purchases are automatically reported to the BIR. The BIR cross checks this with the data base on income tax paid by the buyer. Buyers must have reported enough income to afford the purchase or be liable for unreported income.

WEF also talks of “new data management techniques to prevent fraud and abuse in the public sector. Fraud analytics are now able to detect patterns of suspicious transactions in areas including taxation and healthcare, and with real time detection, agencies have been able to detect, stop and remediate fraud resulting in billions of potential cost savings.”

The WEF also reports that “anti-corruption software tools are being designed specifically for detecting and responding to fraud, including ‘intelligent mining’ of data sets and administrative procedures.”

Data analytics software have been developed that cross-checks data from various sources to identify projects susceptible to risks of fraud, conflict of interests or irregularities, as well as data mining tools through open source procurement monitoring and analytics portals.

WEF observes that “the effective integration of these tools into the e-governance and e-procurement practices of the governments would not only enhance decision making, but also bring greater transparency through the simplification of processes…

“Data analytics are able to periodically investigate transactions in procurement and payment models, check for anomalies and quickly identify suspicious transactions, such as illicit financial flows.

“Other benefits of technology that lead to detection and prevention include the automation of processes that remove human agents, e.g. contracting officials and corruption opportunities from procurement operations. This is targeted at reducing bribery in operations and can be employed in any system.”

While technology has the potential to create unparalleled opportunities for transparency and anti-corruption, WEF warns that “technology is not a quick fix or fast solution… governments and organizations have to be quick to adapt and to act.

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“In some cases, financial and technical investments in innovation will be required at all levels to make these changes happen, coupled with public and private sector collaboration to help officials and agencies make the leap towards new technologies.”

Our take on all these developments is that we have to invest in the appropriate technology, machines, processes and trained personnel, to fully harness technology’s potential to stop or uncover corruption. Agencies like the Commission on Audit and the Ombudsman must modernize their operations to improve their ability to stop corruption.

Then again, there are instances when anti-corruption software will not be able to catch the criminals with hard evidence. That happens if the inputs are tainted to begin with, like having hidden pork in the approved national budget. In that case, the fruits of corruption would have been built into the system.

The Napoles method would have gone undetected if there wasn’t an insider who blew the whistle for personal reasons. Technology can go very far in helping an anti-corruption drive but can be frustrated by a determined human who is not about to be denied his spoils.

In the end, technology will be ineffective in the anti-corruption fight unless the culture of corruption is broken. Everything starts from the man at the top of government. He sets the example and enforces the reform measures needed. His words must match action.

We are not there yet.


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