Is food fraud going to increase because of the pandemic?
Karen Constable of Food Fraud Advisors, thinks that it probably will. Here’s why.
Food fraud is driven by the desire for economic gain. Always. That is the definition of food fraud. Someone who tampers with food for other reasons – say by adding poison to scare consumers – is not committing food fraud. In the food industry we consider tampering for malicious purposes an issue of ‘food defense’ not food fraud.
So, food fraud perpetrators seek economic benefits when they commit fraud, which most commonly manifests as an attempt to receive more money when a food is sold. As an example, if a seller of ground turmeric adds a small amount of bright yellow lead chromate to a sack of poor quality turmeric, the brighter colour might mean that he receives more money than he would for a sack of pure, low-grade turmeric. He gains a direct financial benefit when he commits that type of food fraud.
In addition to direct economic gains, there are less direct methods that criminals use to derive financial rewards from food fraud, such as by avoiding taxes and duties, or by acting dishonestly to fulfill customer orders so as not to lose their business.
One such fraud occurred in Canada in 2013 and 2014 when a fresh produce supplier was unable to source locally-grown cucumbers for their customers. They instead purchased cucumbers from Mexico and relabelled the cartons with ‘Product of Canada’ before dispatch. The company was later fined $1.5 million by the Canadian Food Inspection Agency and a further $3.2 million by the The Ontario Greenhouse Vegetable Growers association.
In addition to the desire for economic benefits, for fraud to occur there also needs to be opportunity. Current events in the global food market and in the wider economy are increasing both the desire for economic gains and also the number of opportunities to commit food fraud.
Direct economic pressures on food sellers
In 2020, most parts of the world are facing extreme economic downturns. The economic situation arising from the pandemic can reasonably be expected to increase criminals’ motivation to commit food fraud for the purpose of increasing profits directly. In addition, we are already experiencing shortages in supply chains that will result in food suppliers experiencing extra pressure to deliver products to their customers. As a result, it is reasonable to expect that there may be an increase in frauds committed for the purpose of retaining existing customers, or even gaining new ones, by supplying goods that are not easily available. Companies may be tempted to take short cuts or turn a blind eye to things that do not appear quite right when they source food and ingredients.
Increased opportunities for criminals
Disruptions in food supply chains caused by the pandemic have provided new food fraud opportunities for criminals. These new opportunities can be organised into three loose groups; excess products, reduction in oversight and changed buying patterns.
Local oversupply of certain food types
Unusual excesses of supply have affected numerous food types and sectors since the pandemic began. Examples include an overabundance of keg-beer in Australia, that was not consumed because bars were closed; a glut of live pigs in the United States after pork processors shut down; excess quantities of milk that had to be dumped by dairy farmers. In the United Kingdom, suppliers are concerned with an oversupply of expensive cuts of meat that would usually be consumed in restaurants or special family events; consumers are instead buying cheaper cuts to cook at home, leaving the more expensive parts of the animal unpurchased.
Wherever there are unusual patterns of oversupply, there are opportunities for fraud perpetrators to make use of the cheap and readily available excess foods for fraudulent purposes. One such fraud of this type has occurred in the United Kingdom in recent years, where cheap, abundant beef has been used to replace some or all of the lamb in dishes sold by food service outlets.
Challenges with oversight
The pandemic has, to date, had a massive impact on the ability of governments and private entities to inspect, audit and test food for authenticity and safety. Lockdown and social isolation rules have prevented audits and inspections, while economic factors have led to cuts in funding and staffing levels in inspection agencies. In Europe, there have been changes to food, veterinary and phytosanitary inspections. In the United States a consumer group has claimed that the Department of Agriculture’s new rules for swine fever inspections are inadequate to protect humans. There have also been reports of problems at ports in Europe that have affected inspection protocols.
Within the food manufacturing sector, businesses are struggling to operate properly due to stay-at-home rules, which have affected staffing levels. Reductions in on-site staff numbers can hamper a manufacturer’s ability to inspect incoming materials or to properly assess new suppliers for their food fraud and food safety risks. In the longer term, cost-cutting measures in economically impacted businesses may reduce their ability to perform food authenticity testing, which can be expensive compared to other food tests. Together, the reduction in personnel resources and authenticity testing leaves manufacturers more vulnerable to inadvertently purchasing and using fraudulent food ingredients.
The pandemic has resulted in significant changes to purchasing behaviour across the whole food supply chain. Online retail food purchases have increased sharply in the first half of 2020. Food sold online has frequently been accused of being less safe and subject to less oversight than food sold in ‘brick and mortar’ stores. In May 2020, online-sold curry was recalled in Britain after it was found to be adulterated with an illegal dye. In the same month, consumer group Which reported that it had found banned childrens’ foods for sale on Amazon.
Some food types have experienced a sudden and unexpected jump in demand. In March 2020, Nestle reported its best sales growth in five years, as more people purchased food to cook and eat at home. Hersheys reported a doubling of its e-commerce sales for March 2020. The defence forces in South Africa experienced an unexpected demand for soldiers’ ration packs, which were needed as personnel were deployed to assist with infection control efforts. That sudden demand might have contributed to a reported incidence of expiry date tampering that affected ration packs for South African soldiers.
There is evidence that the pandemic’s effect on global supply chains has already changed attitudes to importing and exporting food, with local food being favoured by both consumers and governments. This has been termed ‘food trade nationalism’. Such nationalism might provide more incentive for criminals to fraudulently mis-represent imported produce as being locally grown or produced.
It is also reasonable to expect that the current economic and trade environment will result in governments expanding food subsidy schemes to help protect staple foods in developing countries. Subsidy schemes can be defrauded by corrupt food producers, such as occurred with some fruit growers in Sicily in 2017 and with shrimp export subsidy scams in China in 2015 and 2016. Investigators have already uncovered corruption related to the pandemic in Uganda, where government officials were arrested over fraudulent activities related to procurement of maize flour and beans for COVID food relief.
What’s the good news?
The good news is that producers, governments and not-for-profit organisations are working together to get excess food to people who need it. Ohio dairy farmers are turning their excess milk into cheese for charities; the USDA is purchasing unwanted vegetables from farmers for donation to food banks and New York has donated money to food banks to purchase cheese, yoghurt and butter made from excess milk. In Boston, a brewery is using its unwanted beer to make enough ethanol-based hand sanitizer to clean five-hundred thousand hands every week.
Hand hygiene awareness has improved dramatically and food safety experts hope that this will result in long term improvements in hand washing compliance in the food and health care industries.
There are now improved online training options and technology-enabled remote audit options for businesses located outside of major cities and towns, making life easier for our country colleagues.
Finally, food safety culture leaders have been applauding the renewed calls for rules that grant paid sick leave for food handlers, in those jurisdictions where such protections are not yet in place.
What can you do?
Food businesses are at increased risk from food fraud in these difficult times. Food fraud criminals are more likely to target businesses that have less checks and systems in place, seeking out the ‘low hanging fruit’. Therefore, even a small amount of increased vigilance and care can reduce the risk. Now is the time to review food fraud vulnerability assessments and update mitigation plans. Try these activities to help protect your business from food fraud:
- Seek out (and properly check) extra approved suppliers for critical raw materials, ingredients and products.
- Consider sourcing commodities that are used in your key ingredients; they could be used to provide to your suppliers if the suppliers experience problems with procurement.
- Wherever possible, do not use the pandemic as an excuse to avoid performing internal audits or supplier audits.
- Reassess your supply chain in light of the new economic climate, focussing on the people in the supply chain as well as the business entities. The aim is to identify suppliers that might be under financial pressure and people with a history of questionable business dealings. Check business registers and publicly available information such as old newspaper articles for any mention of fraud, bankruptcy, court cases or prosecutions.
- Consider creating a system that allows your employees to anonymously report suspicious activities within your business. This can help reduce the likelihood of theft of finished products or materials from within your own facility or the downstream supply chain.
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