The American Recovery and Reinvestment Act (ARRA) and other international attempts to right the global economy have unintentionally introduced new opportunities for fraud, according to global risk consulting company Kroll. In the latest edition of the Kroll Global Fraud Report, experts argue that the need for increased transparency is more important now than ever to ensure corporate and government accountability and restore public confidence.

"Those impacted by the economic instability who are inclined to engage in fraudulent business practices will work to secure stimulus funds by any means possible," said Blake Coppotelli, senior managing director in Kroll’s Business Intelligence and Investigations practice. "One prime area is infrastructure projects. With the near collapse of the real estate and construction markets, traditional fraud and rackets, such as bribery, kickbacks and bid-rigging, will find a wealth of opportunity in the stimulus funds. In our experience, without extensive anti-fraud policies, oversight and enforcement, 10% of these funds will be lost to fraud and criminal activity."

The spike in fraudulent activity is leading investors and the public alike to ask more questions about how stimulus funds and investor money is being spent. To address these rising concerns, the Kroll report examines several topics relating to the need for increased oversight:

- The role of regulation in fighting fraud

- Increased applicability of the Foreign Corrupt Practices Act

- A rise in misrepresentation of minority or woman-owned status among organizations

- Potential regulatory changes in the wake of the Madoff and other investment scandals (e.g., increased risk assessments, compulsory disclosure of investments’ returns, heightened scrutiny of investment advisers)

"Following the recent spate of high-profile investment scandals, we expect to see heightened activity among the SEC and other regulatory bodies aimed at improving processes for spotting and addressing potential red flags," said Richard Abbey, managing director in Kroll’s Business Intelligence & Investigations practice. "In the meantime, due diligence and compliance best practices remain an investor’s best defense against the increasing risks."