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Innovative ways to root out fraud and corruption in business and government



Governance and corruption must go hand in hand. The best check on corruption is systems based on good governance that can prevent corruption from happening and fighting it when it does.

Like private businesses government is giving high priority to make sure that tax payers money are going into the right pockets. This is also in the clear interest of the poor and destitute in our partner countries.

In 2010 Danish development assistance amounted to more than 16 billion USD equivalent to more than 3 billion USD. These figures place Denmark in the world top league of development assistance providers when measured in terms gross national product.

Based on the latest strategy for Danish development assistance "Freedom from poverty, freedom to change" 1/ 3 of Danish development assistance is allocated to multilateral organizations such as the UN, World Bank etc. and the other 2/3 is contributed directly to a number of countries - also called bilateral assistance. The bilateral assistance is concentrated on the poorest countries in Africa.

As a bilateral donor Denmark is recognizing that security policy, foreign policy and development policy cannot be separated. We have to engage in highly corrupted countries, including the fragile ones - such as Somalia and Sudan. And this implies a high risk of fraud and loss. But these risks might be well worth taking. For what would be the alternative? Another Somalia?

Development in a globalised world demands high risk capital. We must be frank and open and involve the citizens in our considerations. And work together to improve ability to handle - political and financial - risk if we are to make a difference.

Results are closely linked to risk and cannot be achieved without determined action and willingness to take calculated risk.

Against this background "risk policy" - the assessment and management of risk including corruption is a key priority for Danish development assistance. And it figures promptly in Denmark's new strategy for development cooperation.

Firstly, it takes courage to recognize and run risks in development aid. You have to stand up for it. Assessment is key, and we are therefore currently working on an improved system for assessing and measuring risks involved in concrete interventions. A kind of risk index or risk barometer.

Secondly, in 2004 we adopted a zero-tolerance policy against corruption and bribery and launched an Action Plan to fight corruption and developed a code of conduct. Danidas development co-operation is based on a high degree of confidence, and Danida expects cooperation partners to repay this confidence. Misuse of Danida's own funds might occur and will often result in more stringent measures of control and in some situations the case will be handed over to the police. Zero tolerance means accepting corruption may exist, making it clear we don't accept it and taking the necessary measures when and if we discover it. There can be no impunity for corruption.

Thirdly concrete corruption cases must be communicated openly: We make public all corruption cases we encounter, including both the size of the funds retrieved and the amount of Danish tax payer's funds lost. And we name the cooperating partner involved.

Fourthly, effective aid is an important element in fighting corruption. Effective aid is owned and led by our developing partners. Denmark has moved away from traditional projects which could easier be ring fenced with traditional safeguards to mitigate risks. We are increasingly channeling our aid through the national systems of partner countries. It does of course pose new challenges in terms of fighting corruption. We need to trust, but verify. And manage the risks rather than reverting to donor lead approaches and implementation through parallel systems.

Finally, we are constantly working on our ability to measure and document outcomes and results. Tackling risk, including corruption, is also a question about being able to measure what works and what doesn't. To that end, we have launched an international research program to look into the effects and outcome of development cooperation. The big question to be answered is not just, what difference does a specific program make. But also what moves a society forward? What creates lasting change.

When we talk about corruption focus is often on control and enforcement. I would also stress the long-term goal to prevent corruption.

There is nothing natural about corruption. People are not borne corrupt. People learn to be corrupt. So like you cannot fix a leaking boat by just pouring water we cannot in the long term fix the problem of corruption by control and enforcement.

In our own countries this means promoting the development of standards and and procedures designed to safeguard integrity and prevent corruption in the private sector. Denmark was in the forefront with the implementation of the OECD convention on national law making it possible to take Danish companies to court for corrupt activities made abroad.

In our developing partner countries, integrating anti-corruption in our efforts to promote good governance and integrity becomes of high priority. Because corruption is a symptom, the result of a dysfunctional governance system is an outcome of poor governance and low integrity.

Source: Anne Ehrenreich, Danish Ministry of Foreign Affairs