Here’s how technology is changing the corruption game

Documents are seen at the national police archives, which houses more than 80 million pages of official police records, in Guatemala City October 21, 2011.Three historic cases are now being processed using material from the archive, which houses 80 million pages of official police paperwork stretching back to the 1800s, and hundreds of other prosecutions could follow. Picture taken October 21, 2011. To match GUATEMALA-ARCHIVES/  REUTERS/Jorge Dan Lopez (GUATEMALA - Tags: POLITICS CRIME LAW) - GM1E8290JEY01

Digitizing paper-based systems is a major task. Image: REUTERS/Jorge Dan Lopez

Carlos Santiso
Director for Digital Innovation in Government, Development Bank of Latin America
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In bureaucracies, paper is power. As part of their digital transformation, governments are seeking to improve both efficiency and transparency, through the expansion of digital services and online government.

The ambition of digital government is to transform the analogue, paper-based, legacy systems used to interact with citizens and make public services open, simple and citizen-centric.

On 1 January 2019, Argentina became a paperless government. This is no small achievement considering the deep roots of the paper culture in the Argentine bureaucracy.

By going paperless, progressive governments are also trying to cut red-tape. Technology is becoming a key ally in the fight against corruption. New technologies and big data now allow people fighting corruption to reveal, prevent and even predict corrupt practices that in the past could be hidden behind a veil of paper-enabled opacity. PACI’s Tech for Integrity platform launched in 2018 provides a powerful clearing house of tech innovations against corruption.

Back in 1988, American economist Robert Klitgaard summarized the factors encouraging corruption in his famous “corruption formula”: C = M + D – A. Klitgaard said: “Corruption equals monopoly plus discretion, minus accountability.”

In Latin America, the growing middle class is demanding less corruption and better services. The digital revolution is changing the rules of the corruption equation in three main ways.

Making transparency work for accountability

First, new technologies help improve transparency and foster accountability. Governments are opening up their data and civic activists and oversight institutions are using it to hold them to account. Cities often lead the way. Much still remains to be done, however, to open the most critical databases to curb corruption, such as property registries, procurement data, and company registries, according to the Open Data Charter.

Mexico has expanded the breadth and depth of open budget data through its state-of-the-art fiscal transparency portal, which includes public contracts, infrastructure investments, and transfers to subnational governments. Mexico City has become the first city to disclose its contracts in open format. In turn, savvy citizen technologists use this information to scrutinize government and raise red flags to uncover once-hidden practices and patterns.

Several countries are resorting to geo-referencing and data visualization technologies to monitor corruption-prone infrastructure investments in Mexico, Colombia and Paraguay. The Brazilian Development Bank is using them to track progress with the projects financed by the Amazon fund. Audit agencies are resorting to them to oversee public works in Chile and Peru. Cities, such as Buenos Aires through its public works portal, open critical data on local finances.

By going digital, governments generate a huge amount of new data about the machinery of bureaucracies that can be mined to generate new intelligence and insights, sometimes simply by cross-referencing databases.

For example, the observatory of public spending of the Brazilian Transparency Ministry has detected irregular practices in credit card usage by public officials and social benefits programmes, by cross-referencing government databases, generating important savings and policy changes.

Artificial intelligence and predictive analytics provide potent tools to tax authorities and customs agencies to detect and deter tax evasion. In the UK, through its Connect system, the tax administration uses social network analysis and data mining that cross-references company and individual tax records to uncover fraudulent or undisclosed activity. Its predictive algorithm identifies people most at risk of committing tax fraud and helps devise pre-emptive actions through nudges.

Image: World Economic Forum

Reducing discretion and cutting red tape

New technologies can reduce the discretion that unscrupulous bureaucrats abuse to extract bribes, for instance in the processing of permits and licenses. The automation of bureaucratic processes reduces vulnerabilities to human fiddling.

Indeed, beyond the grand corruption scandals, petty bureaucratic corruption remains prevalent in many countries, with bloated bureaucracies and byzantine regulations. According to Transparency International, in 2016, one in every three Latin Americans paid a bribe to access a service.

Mexico, Peru, Brazil, and Argentina are expanding their digital services through integrated whole-of-government portals. Much remains to be done, however, to digitize public services end-to-end, as noted by a recent report. The introduction of digital services is often resisted by vested interests fearing losing perks and jobs.

But digitizing byzantine bureaucratic procedures is not enough; it is necessary to simplify and rethink them. Civil servants are often the first victims of the bureaucratic maze. Several countries are trying to streamline their bureaucracies.

In Portugal, the Simplex programme is redesigning bureaucratic procedures in collaboration with civil society and public servants, with encouraging results. Interestingly, these innovations draw on behavioural insights to nudge gradual changes in the mindset of public servants to place citizens at the centre of government.

Regulatory reform and administrative simplification are back on the political agenda of many newly-elected governments seeking to reduce the regulatory burden and improve competitiveness to boost flagging economies. These efforts include, in 2018 alone, Brazil’s Simplifique!, Colombia’s Estado Simple, and Argentina’s Productive Simplification initiative.

Cutting red tape is an arduous task in a region addicted to new rules and regulations as the solution to their problems. Colombia, by its own account, issued an average of 15 regulations a day between 2010 and 2016. South America remains the most difficult region in which to pay taxes, according to PwC.

Blockchain is generating much hype and hope as an antidote to corruption. It possesses important features that can help anchor integrity in bureaucracies, by securing identity, tracking funds, registering assets, and procuring contracts.

Proof of concepts are mushrooming in a wide range of areas, as documented by NYU’s GovLab – from the restitution of land in Colombia, smart contracts in Chile, and subsidy transfers in Argentina. While the scalability of those solutions remains challenging, blockchain has emerged as the most promising disruptive technology in the fight against corruption.

Challenging state monopoly

New technologies are also starting to challenge the state’s monopoly over the making of public decisions and the delivery of public services. The emergence of gov-tech startups are allowing new forms of co-creation of public services, especially at the city level.

These smaller, more agile companies are starting to make an impact, advancing new solutions to old ways of doing things. For example, they provide a cost-effective solution to data-analytics-as-a-service to governments that are struggling to recruit data science teams.

Last November, Paris hosted the first-ever global govtech summit which reflected the dynamism of public entrepreneurs and government startups in technologically advanced countries such as the UK, France, Canada, and Israel. Govtech startups are not only a new way of providing new technology services to government; these tech-based, data-driven startups are gradually shifting the prevailing paradigm of policy-making and service delivery.

Technology has become transparency’s greatest ally. Coupled with political resolve, the digital revolution can disrupt corruption in ways we never imagined possible.

Learn more about the Partnering Against Corruption Initiative here, and the Tech for Integrity project here.

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