GiveDirectly reveals DRC staff stole $900k in mobile cash fraud scheme

GiveDirectly, the biggest philanthropic organization within the cash transfer movement, has discovered a massive fraud scheme perpetrated by some of its staff in the Democratic Republic of the Congo and has temporarily suspended its work there in response. GiveDirectly is a United States-based nonprofit that sends no-strings-attached cash grants to people living in extreme poverty. For six months, members of its DRC team stole around $900,000 out of a total $7 million that was intended to help impoverished families in DRC’s South Kivu province over a two-year period, the organization revealed Monday. GiveDirectly said it first uncovered the fraud in January and has since “paused operations” in DRC “to prevent further losses.” The swindle in the DRC, combined with other smaller-scale such cases, means that GiveDirectly lost about 1.1 percent of the $147 million it delivered last year to fraud, the highest amount that it has reported to date. The organization said the DRC staff members worked with outside groups to take advantage of a change GiveDirectly made to its mobile payment process that allowed the enrollment team to register people for payments rather than having the intended recipients travel through what it called a “remote, insecure region of DRC.” It did not disclose how many staff members were involved but said some 1,700 families were defrauded. “We apologize first and foremost to the families who were counting on the funds diverted by this scheme,” GiveDirectly wrote in a blog post. “They are the group we’ve let down the most and we will do our best to see that they are paid.” The case — which The New Humanitarian was first to report — is likely to cast a shadow over GiveDirectly’s work and that of cash aid programs globally, if only temporarily. However, experts tell Devex it is important to remember that fraud is not uncommon within global development and humanitarian aid. Within those sectors, they say, cash transfer programs often carry the least risk for misappropriation or diversion of funds. GiveDirectly launched in 2008 and has since become a leader among cash aid programs, transferring more than $650 million to over 1.4 million people in countries such as the DRC, Kenya, Turkey, and Yemen through mobile accounts. It has been at the forefront of bringing new cash aid tools to the humanitarian sector, such as pre-disaster payments to low-income communities impacted by climate change. In 2018, the organization began working in the Democratic Republic of Congo, where it said “the landscape is ripe for cash interventions.” However, it also has noted the security risks of working in the region, which has been plagued by civil unrest for decades. In order to keep villagers from having to travel through regional violence in eastern DRC, GiveDirectly allowed its enrollment team to register the cell phone SIM cards that recipients need to access cash payments rather than sending those recipients to register with independent agents, as is typical for its process. SIM cards are a secure way of delivering cash digitally without intermediaries that also allows for easier audits and investigations, GiveDirectly has said. “When fraud misappropriation cases happen, it is highly unfortunate because that money was intended for the world’s most vulnerable. But we cannot use that as an excuse not to deliver.” --— Sophie Tholstrup, former head of policy, CALP Network GiveDirectly had planned to deliver $7 million total to roughly 5,000 households in the South Kivu province. Each household would receive a one-time transfer of $392, and then $40 per month for the next two years. However, some staffers working in the region conspired to register payment SIM cards to the recipients’ names and then kept those registered SIMs, GiveDirectly said. Those staffers then put different SIM cards in the recipients’ phones. When GiveDirectly began sending payments to those villages last August, enrollment team members worked with others, including some ex-staff members, to divert the funds, GiveDirectly said. “We currently have no reason to suspect that this fraud extends beyond our Eastern DRC programs but are reviewing our procedures across the organization,” GiveDirectly said in the blog post. GiveDirectly has been open in the past about losses due to fraud. In 2021 it also revealed that $241,633 of the more than $106 million it delivered in payments that year had been lost to fraud, including theft, bribes, and imposters. Still, the DRC case represents an unprecedented loss. It also is the first major fraud incident reported since former United Kingdom international development secretary Rory Stewart came on as GiveDirectly’s first president and CEO last year. The organization acknowledges the potential damage the scheme could have on donors’ “faith in our ability to deliver your funds to those most in need.” And it said that it was bringing in external reviewers to help audit its processes. GiveDirectly already has an internal audit team to identify fraud and investigate cases. Still, GiveDirectly should be commended for being so transparent about the incident, according to Sophie Tholstrup, the former head of policy at CALP Network, which was previously called the Cash Learning Partnership. The organization advocates for the use of cash and voucher assistance as humanitarian aid. “It’s very rare in this sector for people to be so upfront and open about the fact that fraud is going to happen. Having conversations about how to minimize this is better than pretending that we can exist in a zero fraud world,” she told Devex. GiveDirectly alerted Devex to the incident last month before revealing the full details Monday. GiveDirectly had several fraud measures in place prior to this incident. Its internal audit team visits communities both before payment and after payment to help GiveDirectly catch issues before it sends money and look for issues that may arise after payment. The organization has said it has a “firewall” between the audit and other staff members because of the possibility that fraud cases might involve GiveDirectly staff. It also has a call center to handle complaints and questions and conduct follow-up calls after payments are made. It benefits the aid sector as a whole, when organizations take such steps to track and disclose fraud, said Charles Kenny, a senior fellow at the Center for Global Development. Kenny has written about corruption within the aid sector, which he has said can be difficult to track because “people don’t tend to advertise the fact that they are involved in corruption.” There aren’t “great measures” of corruption in aid at the moment, he told Devex. “I think the best measure we have is what results we are getting. If we’re getting the results we expected, clearly there can’t be too much fraud and corruption because everything is being delivered at a reasonable price,” Kenny said. He added that “one of the things that I really like about cash transfers” is that it is fairly easy to check whether people have received payments. “If people know what is coming to them and they don’t get it, they can complain,” he said. “And even if they don’t complain, you can ask them.” Because fraud can be more quickly identified with cash payments, doing so “is a fairly risky endeavor,” Kenny said. But the GiveDirectly case proves that some people are willing to take that risk. The organization said that “most or all” of the staff involved are no longer employed there and that it also referred some staff and their external conspirators to local authorities for investigation and prosecution. Only a “very small portion” of the funds taken have been recovered and “in all likelihood the majority will be unrecoverable,” GiveDirectly said in the blog post. It added that make-up payments to defrauded recipients would “come from additional money from GiveDirectly” and the organization would “do our best to ensure all affected recipients are paid.” However, payments in eastern DRC will not restart until the investigation has concluded, GiveDirectly said. The probe is expected to conclude and payments are expected to restart in the next few months, according to GiveDirectly. Tholstrup said that she hopes that publicizing instances of fraud won’t compound perceptions that cash assistance is riskier than other forms of assistance, such as delivering goods and food. Often those perceptions are held by donors concerned that they won’t be able to track whether the money was used for the intended purpose, she said. “When I worked at CALP we would persistently encounter this perception that cash was riskier and it was consistently a reason why people did not want to do cash,” Tholstrup said. However, cash is no more risky than other aid delivery tools, she said. Donations to GiveDirectly have spiked in recent years as the idea of providing cash aid has gone mainstream and been embraced by influential philanthropists such as former Twitter CEO Jack Dorsey and MacKenzie Scott. And the World Bank has noted that research has shown concerns that cash transfers will be used to buy alcohol, tobacco and other so-called “temptation goods” to be “unfounded.” A 2019 CALP Network analysis also showed that losses from or diversion of cash transfers were much lower on average than losses for some in-kind assistance. One of the reasons for that is that cash transfer deliveries involve fewer people who might divert the funding, CALP said. Programs like GiveDirectly usually deliver payments only to those who have registered with the organization. GiveDirectly then checks in with intended recipients to make sure that the cash was delivered and to “see how things are going.” When you deliver cash you know that you are delivering directly to a person who has registered whereas when you deliver goods that must be transported on trucks “there are a lot more junctures in the chain where things can go wrong,” Tholstrup said. With cash, the fraud is more likely to occur as part of the registration or procurement process for cash transfer aid, she said. That was the case with GiveDirectly. “When fraud misappropriation cases happen, it is highly unfortunate because that money was intended for the world’s most vulnerable,” Tholstrup said. “But we cannot use that as an excuse not to deliver.”