Corruption in developed economies mostly petty fiddles
We frequently highlight the problem of expenses fraud on the blog. In developed economies manual expenses systems offer fraudsters the opportunity to fiddle claims. We’ve also featured financial irregularities in the context of developing economies where corruption is more culturally entrenched, such as in India.
From these two narratives it would appear that in developed economies financial corruption is mostly petty and more serious systemic corrupt activity is limited to developing economic areas.
Libor scandal proves this is not the case
However, the last few weeks have shown that this is not the case. The Libor (London Interbank Offered Rate) scandal which is threatening to engulf the banking system is deeply troubling and shows that if anything, corruption is even more serious in developed economies with the ability to reach far beyond the shores of one nation state.
The Libor rate scandal impacts the global economy because Libor is used around the world to determine interbank lending rates for short term loans between banks. The story has a long way to run; it seems that criminal charges may be brought and, rather worryingly, as more facts emerge, Libor seems unfit for purpose.
Capital markets and businesses need governance with a capital G!
At the heart of the issue is governance. Whether at a national level for a developing economy, or in global capital markets, senior leaders must establish good governance as a pre-requisite. Good governance is a management practice pushed down through an organisation; however it is not enough to rely on the integrity of individuals.
Policy and technology support cultural change toward good governance
Policy should be combined with the use of technology to support good governance. Whether in safeguarding the world’s financial system from those that seek to manipulate it for their own ends, or to prevent expenses fraud within businesses, technology tools support a cultural shift toward good governance.