Fraudulent Activities on the Rise in Norway’s Finance Sector
The Norwegian Agency for Development Cooperation (Norad) has reported a significant increase in fraudulent activities in its development aid programs. According to Norad, 56 whistleblowing cases were opened in 2019 alone, prompting concerns about the integrity of their financial transactions.
Factors Contributing to the Increase
The Fraud and Integrity Unit (FIU) attributes this surge in fraudulent activities to several factors:
- Growing share of development aid budget: Norad’s increasing share of Norway’s development aid budget has led to a greater exposure to potential fraud.
- Consolidation of aid organization routines: The consolidation of aid organizations’ routines for detecting and dealing with suspected fraud has resulted in more cases being reported.
New Controls and Verification Methods
FIU head Svend T. Skjønsberg notes that organizations are now placing more emphasis on controls performed by independent entities, which involve comparing information from accounts against information provided by “third parties”. This includes:
- Verifying service delivery: Contacting service providers and recipients of services to confirm the delivery of goods and services.
- Comparing account information: Comparing financial records with information provided by third-party sources.
Modified Rules for Repayment of Funds
The modified rules for repayment of funds may have contributed to the increase in notifications. In 2019, grant recipients had the opportunity to repay misused funds back to the originally agreed project, whereas previously all misused funds were repaid to Norad.
Financial Impacts and Future Directions
As a result of these whistleblowing cases, NOK 18.3 million was repaid to Norad in 2019. The largest amount repaid was more than 7.2 million NOK, while the smallest was just 330 NOK. Norway and Norad have zero tolerance for corruption and other forms of financial fraud, meaning that grant recipients must repay the same amount that has been misused.
Norad’s new guidelines from the Ministry of Foreign Affairs allow for the possibility of misused funds being repaid to the project rather than to Norwegian authorities, as long as certain criteria are met. This includes:
- Grant recipient detection: The grant recipient detecting the incident and notifying Norad in accordance with agreement.
- Local partner internal control: There being no major deficiencies in the grant recipient’s or local partner’s internal control.
Importance of Transparency
FIU head Svend T. Skjønsberg emphasizes that transparency is key, stating, “Organisations at the local level must have the capacity to avoid fraud… Transparency is perhaps the most important value.”
In 2019, Norad received a record- high 119 notifications of suspected financial fraud, with half of these cases resulting in whistleblowing cases being opened. The agency will continue to work towards ensuring that grant recipients are held accountable for any misused funds and maintain zero tolerance for corruption and other forms of financial fraud.