EFFECTIVE MEASURES TO INVESTIGATE PROCUREMENTRELATED CORRUPTION & FRAUD
Tony KWOK Man-wai＊

I. INTRODUCTION
Procurement of goods and services is an area most vulnerable to corruption and fraud, often involving
huge loss of government revenue. In order to effectively investigate the related crime, one needs to understand the “modus operadi” of the corrupt offenders in the process so as to focus on areas where evidence
can be discovered.
Procurement related corruption usually takes the form of the suppliers offering money, entertainmentand other advantages to public officials in return for assistance or favour in the various stages of the procurement process. Advantages offered include provision of lavish entertainment, sexual services; invitation
to gambling, offering gifts and extending loans and other favours.
As the corrupt offenders are invariably smart criminals. It is not possible to list out all the clandestine
methods they could have employed. Some common corruption opportunities that can be identified in the
procurement process are:Requisition Stage:
⿟⿟ public officials drawing up a requisition specification in favour of a particular supplier, e.g. quoting
brand name & model number which only the specific supplier can have ready stock.
⿟⿟ public officials splitting the amounts in the purchase orders so that they can exercise theirauthority to approve, whereas the full amount would require approval of high authority
⿟⿟ public officials allowing unqualified supplier to be included in the “approved suppliers list”
⿟⿟ public officials inflating the budget price to make room for illegal commission
SBS, IDS, JP, Honorary Fellow, Adjunct Professor & Hon Course Director of Anti Corruption Program,Hong Kong University SPACE and Former Deputy Commissioner and Head of Operations Independent Commission
Against Corruption (ICAC), Hong Kong. About the author: Mr Kwok joined the Hong Kong Independent Commission
Against Corruption (ICAC) shortly after its inception in 1975, and hence had witnessed and participated in the successful
battle in transforming Hong Kong from a most corrupt place to one of the cleanest city. He retired as Deputy Commissioner
and Head of Operations in 2002, after having led the Commission through the smooth transition of sovereignty from a
British Colony to China in 1997, despite international pessimism.

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Since his retirement in 2002 he has been invited to 25 countries in a total of 220+ missions to share his anti-corruption experience. In particular, he has assisted a number of countries to set up their new anti-corruption agencies, including Mongolia,
Cambodia, Serbia, Mauritius and Timor Leste.
He is a member of the UNODC Anti-corruption Expert Group (2006), Visiting Lecturer of the International Anti Corruption
Summer Academy (2011 & 2012), Regional Coordinator (Asia) of the International Association of Anti Corruption Authorities; Honorary Anti Corruption Advisor to the Office of the Ombudsman of the Philippines and the Mongolian Independent
Authority Against Corruption; Visiting Professor of the National Prosecutors College & four other universities in China. He
is also the Past Chairman of the Chartered Management Institute, Hong Kong Branch.
In Hong Kong, he assisted the Hong Kong University in designing the world’s first International Postgraduate Certificate
Course in Corruption Studies and he is the Adjunct Professor and Honorary Course Director. Since the first launch in 2003,
13 annual courses have been organized and it has attracted over 350 delegates, mostly senior officials of anti-corruption
agencies, coming from 38 countries. He received the “Outstanding Teacher Award” from the University in 2006.
In the Hong Kong National Day Honour List, Mr. KWOK was awarded the ICAC Distinguished Service Medal (IDS) by the
Chief Executive in 1998 and the Silver Bauhinia Star (SBS) in 2002, in recognition of his contribution to the success of ICAC
in the fight against corruption in Hong Kong. He was appointed as the Justice of the Peace (JP) in 2016.

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Inviting quotation/tender stage:
⿟⿟ public officials leaking prices quoted by other competitors to a certain bidder, so that a lower
quote can be made before the stipulated deadline
⿟⿟ public officials tampering with the quotations/tenders after the deadline in favour of a certain
bidder.
⿟⿟ public officials conspiring with a bidder to submit false tenders/quotations so as to meet theminimum requirement of quotations/tender bids⿟⿟ public officials assisting a certain bidder in the preparation of quotation/tender to fit in with theconfidential set of criteria
Evaluating & Awarding Stage⿟⿟ public officials showing favour to a certain bidder or making a biased decision not based on set
criteria and merit⿟⿟ public officials modifying the criteria and weightings in favour of a certain bidder after the quotations/tenders have been received
⿟⿟ Failing to declare conflicts of interest
Receipt of Goods & Services
⿟⿟ Supplier providing short delivery or sub-standard goods
⿟⿟ Supplier providing false certificate on quality of goods
⿟⿟ Public officials failing to report the substandard or short delivery of goods or to take appropriate
action and sanction against the supplier⿟⿟ Public officials over-rating the supplier’s performance to enable the supplier to be favourably considered in future procurement exercises
In some cases, corruption takes the form of nepotism where the public officials show special favour inawarding procurement tenders to suppliers owned by his close relatives or personal friends.
In cases of fraud, where public officials may not be involved, it often takes the form of submitting
quotation/tenders with false particulars and certificates, so as to score higher marks in the assessment.
There are also cases where the approved suppliers conspire together to submit pre-determined prices so
as to avoid competitions amongst themselves.

II. DIFFICULTIES OF INVESTIGATING CORRUPTION
Procurement related corruption and fraud is regarded as one of the most difficult crimes to investigate.
It is by nature a secretive crime and often involves just two satisfied parties, so there is no incentive to
divulge the truth. There is no scene of the crime nor fingerprints to follow up. Even if there are witnesses,
they are often parties to the corruption themselves, hence tainted with doubtful credibility when they
become prosecution witnesses in court. The offenders are intelligent and professional and know how tocover up their trails of crime. In this modern age, the sophisticated corrupt offenders will make fulladvantage of the loopholes across jurisdictions in the bribe payments and acquire the assistance of otherprofessionals, such as lawyers, accountants and computer experts in their clandestine operations and tohelp them launder their corrupt proceeds.
A. Prerequisites for an Effective Investigation
Hence, there is an essential need for professionalism in corruption investigation. There are several prerequisites to an effective corruption investigation:a. Independent — procurement related corruption can involve very senior public officials and hence
the investigation can be politically sensitive and embarrassing to the Government. The investigation
can only be effective if it is truly independent and free from undue interference. This depends verymuch on whether there is a top political will to fight corruption in the country, and whether thehead of the anti-corruption agency has the moral courage to stand against any interference.
b. Adequate investigative power — Because such corruption is so difficult to investigate, you needadequate investigative power. The HK ICAC enjoys wide investigative power. Apart from the195

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normal police power of search, arrest and detention, it has power to check bank accounts, intercept
telephone communications, conduct surveillance and undercover operations, require suspects to
declare their assets, require witnesses to answer questions on oath, restrain properties suspected to
be derived from corruption, and hold the suspects’ travel documents to prevent them from fleeing
the jurisdiction. I must hasten to add that there is an elaborate check and balance system toprevent abuse of such wide power.
c. Confidentiality — it is crucial that all corruption investigation should be conducted covertly andconfidentially, at least before arrest action is ready, so as to reduce the opportunities for compromise or interference. On the other hand, many targets under investigation may prove to beinnocent and it is only fair to preserve their reputation before there is clear evidence of theircorrupt deeds. Hence in Hong Kong, we have a law prohibiting any one, including the media, fromdisclosing any details of ICAC investigations until overt action such as arrests and searches havebeen taken. The media once described this as a “press gag law” but they now have come to accept
it as the right balance between press freedom and effective law enforcement.
d. International mutual assistance — many corruption cases are now cross jurisdictional and it isimportant that you can obtain international assistance in the areas such as locating witnesses andsuspects; money trails, surveillance, exchange of intelligence, arrest, search and extradition, andeven joint investigation and operation.
e. Professionalism — all the investigators must be properly trained and professional in their investigation. The HK ICAC strives to be one of the most professional law enforcement agencies in theworld. ICAC is one of the first law enforcement agencies in the world to introduce the interview ofall suspects under video, because professional interview techniques and the need to protect the
integrity of the interview evidence are crucial in any successful corruption prosecution. The investigators must be persons of high integrity. They must adhere strictly to the rule of confidentiality,
act fairly and just in the discharge of their duties, respect the rights of others, including thesuspects and should never abuse their power. As corruption is so difficult to investigate, they need
to be vigilant, innovative and be prepared to spend long hours to complete their investigation. The
ICAC officers are often proud of their sense of mission and this is the single most important ingredient of success of the ICAC.
f.

An effective complaint system — No anti-corruption agency is in a position to discover all corrupt
dealings in the society by itself. They rely heavily on an effective complaint system. The system
must be able to encourage quality complaints from members of the public or institutions, and at thesame time, deter frivolous or malicious complaints. It should provide assurance to the complainantson the confidentiality of their reports and if necessary, offer them protection. Since the strategy is
to welcome complaints, customer service should be offered, making it convenient to report corruption. A 24-hour reporting hotline should be established and there should be a quick response system
to deal with any complaints that require prompt action. All complaints, as long as there is substancein them, should be investigated, irrespective of how minor the corruption allegation. What appears
to be minor in the eyes of the authority may be very serious in the eyes of the general public!

B. Understanding the Process of Corruption
It should be helpful to the investigators to understand the normal process of bribery, through which
the investigators would be able to know where to obtain evidence to prove the corrupt act. Generally, abribery transaction may include the following steps:
1. Softening up process — it is quite unlikely that a public official would be corrupt from his first day
in office. It is also unlikely that any potential bribe-offerer would approach any public official to offera bribe without building up a good relationship with him first. Thus, there is always a “softening up
process” when the briber-offerer would build up a social relationship with the public official, forexample, inviting him to dinner and karaoke etc. Thus, the investigator should also attempt todiscover evidence to prove that the public official had accepted entertainment prior to the actual
corrupt transaction.

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2. Soliciting/offering of bribe — when the time is ripe, the bribe-offerer would propose to seek favour
from the public official and in return offer a bribe to him. The investigator should attempt to provewhen and where this had taken place.
3. Source of bribe — when there is agreement for the bribe, the bribe-offerer would have to withdraw
money for the payment. The investigator should attempt to locate the source of funds and whether
there was any third person who assisted in handling the bribe payment.
4. Payment of bribe — The bribe would then be paid. The investigator should attempt to find out
where, when and how the payment was effected.
5. Disposal of bribe — On receipt of the bribe, the receiver would have to dispose the cash. The investigator should try to locate how the bribe was disposed, either by spending or depositing into abank.
6. Act of abuse of power — To prove a corruption offence, you need to prove the corrupt act or theabuse of position, in return for the bribe. The investigator needs to examine all the documents andwitnesses relating to the full process of the procurement, in order to ascertain whether any of theabuse of process described in the earlier paragraphs can be found.
The task of the investigator is to collect sufficient evidence to prove the above process. He needs toprove “when”, “where”, “who”, “what”, “how” and “why” on every incidence, if possible. However, thisshould not be the end of the investigation. It is rare that corruption is a single event. A corrupt government servant would likely take bribes on more than one occasion. A bribe-offerer would likely offer bribes
on more than one occasion and to more than one corrupt official. Hence it is important that the investigator should seek to look into the bottom of the case, to unearth all the corrupt offenders connected with thecase.
C. Methods to Investigate Corruption
Investigating corruption can broadly be divided into two categories:
a. Investigating past corruption offencesb. Investigating current corruption offences
D. Investigating Past Offences
The investigation normally commences with a report of corruption and the normal criminal investigation technique should apply. Much will depend on the information provided by the informant and fromthere, the case should be developed to obtain direct, corroborative and circumstantial evidence. The
success of such investigation relies on the meticulous approach taken by the investigators to ensure that“no stone is left unturned”. Areas of investigation can include detailed checking of the related bankaccounts and company ledgers, obtaining information from various witnesses and sources to corroborate
any meetings or corrupt transaction etc. At the initial stage, the investigation should be covert and kept
confidential. If there is no evidence discovered in this stage, the investigation should normally be curtailed
and the suspects should not be interviewed. This would protect the suspects, who are often public
servants, from undue harassment. When there is a reasonable suspicion or evidence discovered in the
covert stage, the investigation can enter its overt stage. Action can then be taken to interview thesuspects to seek their explanation and if appropriate, the suspects’ home and office can be searched forfurther evidence. Normally further follow-up investigation is necessary to check the suspect’s explanationor to go through the money trails as a result of evidence found during searches. The investigation isusually time-consuming.
E. Investigating Current Corruption Offences
Such investigation will enable greater scope for ingenuity. Apart from the conventional methods
mentioned above, a proactive strategy should always be preferred, with a view to catch the corrupt redhanded. In appropriate cases, with proper authorities obtained, surveillance and telephone intercepts canbe mounted on the suspects and suspicious meetings can be monitored. A co-operative party can be
deployed to set up a meeting with a view to entrap the suspects.

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Undercover operation can also be considered to infiltrate a corruption syndicate. The pre-requisites toall these proactive investigation methods are professional training, adequate operational support and acomprehensive supervisory system to ensure that they are effective and in compliance with the rules ofevidence. As mentioned above, corruption is always linked and can be syndicated. Every effort should be
explored to ascertain if the individual offender is prepared to implicate other accomplices or the mastermind. In Hong Kong, there is a judicial directive to allow a reduction of 2/3 of the sentence of those
corrupt offenders who are prepared to provide full information to ICAC and to give evidence against theiraccomplices in court. The ICAC provides special facilities to enable such “resident informants” to bedetained in ICAC premises for the purpose of de-briefing and protection. This “resident informant” system
has proved to be very effective in dealing with syndicated or high-level corruption.
F. Investigation Techniques
To be competent in corruption investigation, an investigator should be professional in many investigation techniques and skills. The followings are the essential ones:
⿟⿟ Ability to identify and trace persons, companies and properties⿟⿟ Interview techniques⿟⿟ Document examination
⿟⿟ Financial Investigation
⿟⿟ Conducting a search & arrest operation
⿟⿟ Surveillance and observation
⿟⿟ Acting as an undercover agent
⿟⿟ Handling informers
⿟⿟ Conducting an entrapment operation
G. Professional Investigative Support
In order to ensure a high degree of professionalism, many of the investigation techniques can be undertaken by a dedicated unit, such as the following:⿟⿟ Intelligence Section: a central point to collect, collate, analyse and disseminate all intelligenceand investigation data, otherwise there may be major breakdowns in communication and operations
⿟⿟ Surveillance Section: a very important source of evidence and intelligence. The Hong Kong
ICAC has a dedicated surveillance unit of over 120 surveillance agents and they have made significant contributions to the success of a number of major cases
⿟⿟ Technical Services Section: provides essential technical support to surveillance and operations
⿟⿟ Information Technology Section: it is important that all investigation data should be managed
by computer for easy retrieval and proper analysis. In this regard, a computer can be an
extremely useful aid to investigation. On the other hand, a computer is also a threat. In thismodern age, most personal and company data are stored in computers. The anti-corruption
agency must possess the ability to break into these computers seized during searches to examine
their stored data. Computer forensics is regarded as vital for all law enforcement agencies
worldwide these days
⿟⿟ Financial Investigation Section: The corruption investigations these days often involve a sophisticated money trail of proceeds of corruption, which can go through a web of off-shore companies
and bank accounts, funds etc. It is necessary to employ professionally qualified investigative accountants to assist in such investigation and in presenting such evidence in an acceptable format
in court.
⿟⿟ Witness Protection Section: ICAC has experienced cases where crucial witnesses were compromised, with one even murdered, before giving evidence. There should be a comprehensive
system to protect crucial witnesses, including 24-hour armed protection, safe housing, newidentity and overseas relocation. Some of these measures require legislative backing.
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III. CONCLUSION AND OBSERVATION
In conclusion, the success factors for an effective investigation of procurement related corruption andfraud include:⿟⿟ An effective complaint system to attract quality corruption reports
⿟⿟ An intelligence system to supplement the complaint system and to provide intelligence support
to investigations
⿟⿟ Professional & dedicated investigators who need to be particularly conversant with the procurement process and its corruption and fraud opportunities. They should also be effective in interviewing techniques and financial investigation
⿟⿟ More use of proactive investigation methods, such as telephone intercepts, surveillance and undercover operations
⿟⿟ Ensure strict confidentiality of corruption investigations, with a good system of protection ofwhistle-blowers and key witnesses
⿟⿟ International co-operation in mutual legal assistance and tracing of corrupt proceeds

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