Wed | Jul 15, 2020

Collin Greenland | The effects of fraud on the Jamaican economy

Published:Sunday | December 29, 2019 | 12:00 AM
Collin Greenland

The following is an edited version of a presentation made at the Association of Fraud Examiners (Jamaica Chapter) on November 15, 2019, at The Jamaica Pegasus hotel.


T HE WORLD SITUATION: The Association of Certified Fraud Examiners (ACFE), in their survey ‘Report to the Nations – 2018 Global Study on Occupational Fraud and Abuse’, found that organisations lose five per cent of their annual revenues to fraud. To place their estimate in context, if the five per cent loss estimate were applied to the 2017 estimated gross world product of US$79.6 trillion, it would result in a projected total global fraud loss of nearly US$4 trillion.

The United Nations Development Programme also contends that corruption is the single greatest obstacle to economic and social development around the world, and every year, $1 trillion is paid in bribes while an estimated $2.6 trillion is stolen annually through corruption – a sum equivalent to more than five per cent of the global gross domestic product (GDP). In developing countries like Jamaica, funds lost to corruption are estimated at 10 times the amount of official development assistance.

THE JAMAICAN SITUATION: The journal Economics and Sociology, published by the Centre of Sociological Research, in cooperation with six European universities, in their article titled ‘Combined Effect of Economic Variables on Fraud, a Survey of Developing Countries’ (Vol 10, No. 2, pp. 267-278), examined the combined effect of economic variables on fraud using seven variables, namely, fraud, the size of government, democracy, per capita income, inflation, the total value added of the industrial sector divided by GDP, and the total value added of the service sector divided by GDP.

We shall utilise components of this methodology to assist us in analysing the effect of fraud on the Jamaican economy.


If we use the ACFE’s world average estimate of five per cent lost to fraud and apply it to Jamaica’s 2019-2020 Budget, five per cent of $835.9 billion amounts to a whopping J$41.79 billion. This figure exceeds the amounts allocated to key areas of the Jamaican economy based on estimates tabled by the Ministry of Finance and the Public Service and exceeds the individual budgets allocated to 10 key ministries whose performances are crucial to the nation’s economic success.

For example, this amount exceeds the budgets for ministries such as Tourism ($11.5 billion); Economic Growth and Job Creation ($10.9 billion); Justice ($8.5 billion); Foreign Affairs and Foreign Trade ($4.8 billion); Labour and Social Security ($2.7 billion); Culture, Gender, Entertainment and Sport ($4.1 billion); Industry, Commerce, Agriculture and Fisheries ($9.6 billion); Science and Technology ($7.3 billion); Transport and Mining ($10.2 billion); and Local Government and Community Development ($11.6 billion).


According to the World Bank, the GDP in Jamaica was worth US$15.72 billion in 2018. Again, applying the ACFE’s average of five per cent loss on GDP by fraud, this equates to a staggering US$786 million, or J$110.826 billion, at current US$ to J$ conversion (US$1 – J$141). This figure not only represents about 13.26 per cent of Jamaica’s 2019-20 total Budget of $835.9 billion, but of concern also, it exceeds the individual budgetary allocations of all ministries, except for the super ministry, Ministry of Finance and the Public Service, which was allotted a total budget of J$385.6 billion.


Findings of the journal Economics and Sociology postulated that the more contribution of the service sector to GDP, the greater the number of fraud cases.

Tourism is Jamaica’s top foreign exchange earner, a major job provider, and a driving force for economic growth. It contributes nine per cent to the country’s GDP and about 20 per cent of GDP in terms of revenue. The Jamaican economy manifested much of the empirical assessments made by the journal Economics and Sociology as there is much consensus locally that the industrial sector and manufacturing are the driving forces of the economy. When the share of this sector in GDP increases, the incidence of fraud decreases. From the other side, when the share of the service sector in GDP increases, incidents of fraud increases.

The journal also found that the most influential factors for combating fraud are the combination of economic activities, using two variables for this item – the value added of the industrial sector divided by GDP (IG); and the value added of the service sector divided by GDP (SG). These analyses concur with the ACFE’s 2018 study, which found that the greatest number of fraud cases occurred in the banking and financial services, manufacturing, and government and public administration sectors.


The Jamaica Stock Exchange (JSE) is the world’s best-performing stock market as in 2018, Jamaica’s main index rose 29 per cent in US dollar terms, the most among 94 national benchmarks tracked by Bloomberg. On September 30, 2019, the market capitalisation had surpassed the $2 trillion mark for the first time.

Again applying the ACFE’s five per cent cost of fraud to the combined market capitalisation on the books of JSE, as at November 11, 2019, of $2,017,038,099,356.58, then about $100,851,904,967.82 may be adversely affected by fraud.

It is important to note, however, that the above analyses of the effect of fraud on the Jamaican economy may be conservative based on the results of work done by organisations such as the International Monetary Fund, the World Bank, the ACFE, and PWC.


Special attention has been directed to the industrial, manufacturing, and service sectors since the full spectrum of fraud’s effect on Jamaica’s economy is too voluminous and multifaceted to be comprehensively addressed in this presentation.

However, the following are deemed priority concerns arising from the effects of fraud:

• Threat to macroeconomic stability;

• Threat to the integrity of the financial sector;

• Threat to foreign direct investment;

• Adverse impact on micro, small, and medium-sized enterprises;

• Adverse impact on cost of living/poverty.


The following recommendations are considered some of the key approaches that must be utilised in this ongoing fight against fraud:

• Revisit corporate governance/management responsibilities with a view to inculcating, strengthening, and mandating more robust and vigilant fraud-fighting responsibilities.

• Conduct more frequent anti-fraud sensitisation/training on a national scale, similar to this conference.

• Strengthen internal audit services nationally.

• Utilise anti-fraud methodologies such as fraud policies, whistleblowing policies, fraud risk assessments, graphologists, and so on.

• Utilise greater use of anti–fraud specialists.

- Collin Greenland is a forensic accountant. Email feedback to and