Eliminating Fraud and Corruption from States of Crisis – How Blockchain Brings Transparency and Reliability to Non-Profits and NGOs

November 11, 2017
OpenLedger DEX

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The Ebola virus outbreak that put the world in a state of panic in 2013-2016 was one of the deadliest epidemics in our recent history. The deadly disease claimed the lives of over 11,000 people and leaving many more hospitalized. The virus roamed the rural areas of West Africa, mostly affecting Guinea, Liberia, and Sierra Leone.

The high mortality rate of this disease made a lot of people across the world fear for their life. Thanks to the cumulative help of World Health Organization and many humanitarian non-profit organization, like Red Cross, the outbreak was officially stopped in the middle of 2016.

Now, while there was a raging battle between health organizations, its volunteers and the deadliest outbreak of Ebola in history, there were some people who found that a state of crisis is the perfect time to take some money for themselves.

A recent investigation found out that more than $6 million was stolen from Red Cross during the Ebola crisis through fraudulent and increased exchange rates, prices and fake bills.

  • In Guinea over $1.17 million was lost due to exaggerated customs bills;
  • In Sierra Leone the collusion of former Red Cross staff and local banks resulted in about $2.13 million lost;
  • It’s estimated that over $2.7 million was lost to increased and overestimated prices, payrolls and payouts to volunteers in Liberia.

This case of fraud is not the first time Red Cross has shown itself in bad light. During hurricane Katarina in 2005, the attempt to reduce costs resulted in inedible food arriving to the place of crisis, because the food was transported without refrigeration. After an earthquake devastated Haiti in 2010 there was more than half a billion dollars raised, which was used rather sparingly, leaving a lot of people guessing where their donations went. These cases have created controversy around non-profits and their efficiency, making many people opt-out of donating.

To make sure that such cases won’t happen again in the future the International Federation of Red Cross and Red Crescent Societies (IFRC) increased its standards and created a “triple defence” protocol, which aims to prevent frauds and corruption.

It does this by limiting the use of cash, increasing the supervision with professional auditors, strengthened background checks and oversight. This will surely decrease the amount of cases of fraud and corruption, but there are still opportunities to do so. There are not enough supervisors to control the situation and all of these supervisors, undertaking background checks and extra training require more money that could otherwise be spent on dealing with crises.

This is where blockchain technology would vastly help the situation. Blockchain technology can eliminate corruption and fraud without enormous amounts of extra investments, creating increased security, whilst being more cost efficient.

The blockchain is a digital record book that is run by a network of computers around the world, working together to process and store information about transactions. The ledger is public and transparent, meaning that every participant can easily see, what transactions have been. This technology makes transactions across the planet almost instant and reduces costs, whilst giving access to anyone who has a connection to the internet.

This technology has the potential of eliminating fraud and corruption from critical situations, where all of the funding should go to eliminating an epidemic or saving peoples’ lives, not to people who think it would be nice to have a little more money in their life.

As the blockchain is decentralized, meaning that it is run by computers across the world, it removes the need of using middlemen to reach the recipient. It also eliminates the need of exchanging currencies with the use of cryptocurrencies, which are universal. In this case, a substantial amount of money would have been saved from not using unreliable third-parties and fraudulent banking services, including sham currency exchanges.

The transparency of the system also allows every donator to see, where his/her donation went. It also keeps the organisation accountable, as everyone can see how they have used the donations and once they do something suspicious, it can be immediately noticed and the organization can be called out for their action.

In addition the network of computers that runs the blockchain cost less to keep running than using traditional methods of exchanging currencies, going through banks and training a fleet of supervisors and auditors to oversee the transactions made by a non-profit.

Blockchain companies like OpenLedger are continuingly working on developing blockchain technology, or BaaS, to combat corruption and fraud, revolutionize the way we make transactions and bring reliability and security back into the world of finance.

“Every day in the cryptocurrency sector we have the brightest minds on the planet working on problems many experts thought could never be solved, while using some of the most innovative technology the world has ever seen” says the owner and CEO of OpenLedger, Ronny Boesing. “Blockchain technology holds the keys to reaching the 2 billion unbanked, bringing transparency and justice to a broken financial system, stamping out corruption and exploitation.”

In conclusion, we can see how blockchain technology could have brought transparency and accountability to situations where human lives were at danger, while also reducing costs and leaving more money to be spent on meaningful causes.

Many more lives would have been helped if there wouldn’t have been people who stole donations that were collected to relieve the aftermath of an earthquake, or save people from dying of horrible diseases. The new stricter protocols for eliminating corruption are better than before, and the blockchain is the next step in creating a better solution.

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