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Confronting Corruption in Colombia

Colombia can position itself as an example to the rest of Latin America by confronting corruption head on


Over the past eight years under President Álvaro Uribe, Colombia made dramatic strides in improving security and boosting investor confidence, advances that are applauded at home and abroad. Still pending, however, is a clear and energetic campaign to root out corruption. In the recent presidential election, won by Juan Manuel Santos, Uribe’s former defense and economy minister, voters across the country expressed a clear desire for a robust rule of law and an end to crime and corruption. Similarly, while Colombia has increased the level of confidence in its legal system, according to Doing Business, the annual country scorecard produced by the International Finance Corporation, it still has a long way to go in battling corruption, promoting transparency, enhancing the credibility of its courts, and, most importantly, resolving conflicts by institutional means rather resorting to the many forms of violence that have plagued the republic throughout its 200 year history.

Corruption and fraud in
Colombia are not only real problems, but also problems of perception. Public opinion is often more easily outraged by a scandal involving a government minister, or by a high-level private sector executive, than by the constant bleeding of public health funds or by the kickbacks involving mid-level bureaucrats throughout the country. Both situations require urgent attention and decisive responses. While Colombia may have improved its ranking in Transparency International’s global Corruption Perception Index, the enduring perception among Colombians is that things have gotten worse. Most believe that the major infrastructure projects needed to help Colombia compete internationally are never completed or, at best, are finished after interminable delays because public servants and their private sector accomplices misappropriate the funds.

This perception of the situation, which to a large extent is correct, should signal to the new government the importance of implementing a coherent, sustained strategy to root out corruption, both public and private, which is clearly an obstacle to economic development. Clear and achievable goals are needed with the understanding that fraud and corruption can never be entirely eradicated. Only by doing so – and increasing the efficiency of, and return on, state-run investments – can
Colombia, or any other emerging economy, improve its competitive position in the global marketplace. By leveraging the public’s outrage, the Colombian government has an opportunity to change the country’s “anything goes” culture and attack the scourge of corruption with a new sense of purpose.

In order to attack the problem effectively, though, it is essential to recognize that corruption is not confined to the government and to public contracts. It is just as common in the private sector and among nongovernmental organizations. Whether we’re talking about delivering humanitarian aid to
Haiti or running the treasury operation of a privately owned bank, the risk of fraud or corruption is prevalent. In the latest annual Global Fraud Survey, produced by the Economist Intelligence Unit for Kroll, Colombian business executives expressed great concern about fraud. The numbers are striking: 94 percent of those surveyed said that their company or organization had been the victim of fraud; 88 percent that they feel more exposed to the risk of fraud; and 97 percent that they were planning to invest in at least one new measure in the coming year in order to reduce the risk of their companies losing money through fraud.

The last of these statistics comes as no surprise. In the four years since opening the Kroll Colombia office, we have come to know a number of business executives who are conscious of the need to implement measures to counter operational risks in their companies. This is reflected in a significant growth of our fraud prevention services, a welcome but atypical situation. In many of the countries in which Kroll operates around the world, clients typically seek our services to investigate fraud or corruption when the deed has already been done. In contrast, Colombian business owners and executives are realizing that it is far more economical to invest in preventative measures than to react after the fraudsters have transferred stolen funds offshore or have themselves moved to other countries to enjoy their spoils.

Such investment is necessary because the traditional compliance culture that prevails today in most companies, as well as the regular internal audits and other controls, are often insufficient to detect and prevent fraud. Normal internal audit programs need to be complemented by methodologies that are based on experience gained from actual multidisciplinary fraud investigations. The objective is to prevent fraud from occurring and to identify new methods for combating this cancer.

Colombia has developed a methodology that helps reduce the number of frauds, in part by changing the culture within institutions. This methodology, which we call institutional integrity, begins with an analysis of standards and policies that already exist within a company, such as codes of ethics, corporate mission statements, policies and procedures for internal controls, audit reports, board directives, and various other manuals and guides. The goal is to transform all of these initiatives and controls into something more than a compendium of good intentions.

Integrity programs differ from industry to industry and from institution to institution, but to succeed any such initiative must be set up with complete support and leadership from the top. It must also include tools for identifying risk, detecting different kinds of fraud, reporting irregularities, investigating when alarms are sounded, denouncing fraudsters to the proper authorities, and communicating to stakeholders. In addition, an integrity program must be adaptable, so that lessons learned from experience can be used to strengthen it further.

Ultimately, though, the goal is not simply to put in place good processes, however important they may be. Whether it is developing new rules for public bidding on government contracts, designing corporate responsibility guidelines consistent with both
CSR best practice and the requirements of corruption regulation such as the FCPA and UK Bribery Act, conducting a due diligence investigation of a new hire, setting up a system of background checks on suppliers, partners, clients, and employees, establishing an integrity hotline to allow employees to report irregularities anonymously, or performing a fraud stress test in a company’s treasury department, real change can only be accomplished through a shift in mentality and a policy of zero tolerance for fraud or corruption.

Very much contrary to the cynics who still maintain that the world is divided between those who have been caught and those who have not, Kroll is confident that a new class of business and political leaders is emerging. These individuals are guided by the conviction that doing the right thing and playing by the rules not only brings personal satisfaction but also pays big dividends for a company, an organization, or a country. Expectations in
Colombia are high. Even so, we are optimistic that the country – including its politicians, business leaders, and ordinary citizens – can begin to position itself as an example to the rest of Latin America by proving that a country can grow and generate new opportunities by confronting corruption head on.


Andrés Otero is a Managing Director and Head of Kroll’s Miami office. He is an expert in a variety of investigative and intelligence areas, including fraud and anti-corruption services, dispute advisory and conflict resolution. Ernesto Carrasco is an Associate Managing Director and Head of Kroll’s Bogota office. He specializes in investigations into corporate and financial fraud for clients in Colombia, Panama and Chile. This article is republished with permission from Kroll Tendencias, Kroll’s monthly newsletter.


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