Broadly defined, corruption is the abuse/misuse of entrusted power (obtained by heritage, education, marriage, election, appointment or whatever else) for private gain. Because corruption involves interactions and relationships between people and networks, it is a pervasive and complicated social phenomenon.

It is useful to identify three variants of the concept of corruption:

• quid pro quo corruption: Quid pro quo focuses on the “you scratch my back, I scratch yours” bribery deals.
• monetary influence; and
• distortions;

At the outset, Corruption can be distinguished between ‘true corrupt intent’ and ‘necessary corruption’. True corrupt intent implies bribery or an action to obtain an illicit benefit, whereas necessary corruption occurs to get things done (i.e., to obtain a legally entitled service for example grease payment to expedite agency applications). Some main forms of corruption are bribery (including grease payments), embezzlement, fraud, and extortion.

Although predominant focus is paid on public corruption (i.e. abuse of entrusted power by a public official), there are private corruptions as well which do impart negative effects and externalities into society at large.

Corruption can be broadly classified as grand, petty and political (and other variants interrelated to these broad types), depending on the amounts of money lost and the sector where it occurs.

Petty corruption

Small scale, bureaucratic or petty corruption is the everyday corruption that takes place at the implementation end of politics, where the public officials meet the public. Petty corruption is bribery in connection with the implementation of existing laws, rules and regulations, and thus different from “grand” or political corruption. Petty corruption refers to the modest sums of money usually involved, and has also been called “low level” and “street level” to name the kind of corruption that people can experience more or less daily, in their encounter with public administration and services like hospitals, schools, local licensing authorities, police, taxing authorities and so on. Grease payments also fall under this category.

Sporadic (individual) corruption

Sporadic corruption is the opposite of systemic corruption. Sporadic corruption occurs irregularly and therefore it does not threaten the mechanisms of control nor the economy as such. It is not crippling, but it can seriously undermine morale and sap the economy of resources.

Systemic corruption

As opposed to exploiting occasional opportunities, endemic or systemic corruption is when corruption is an integrated and essential aspect of the economic, social and political system, when it is embedded in a wider situation that helps sustain it. Systemic corruption is not a special category of corrupt practice, but rather a situation in which the major institutions and processes of the state are routinely dominated and used by corrupt individuals and groups, and in which most people have no alternatives to dealing with corrupt officials.

Political (Grand) corruption

Political corruption is any transaction between private and public sector actors through which collective goods are illegitimately converted into private-regarding payoffs. Political corruption is often used synonymously with “grand” or high level corruption, distinguished from bureaucratic or petty corruption because it involves political decision-makers. Political or grand corruption takes place at the high levels of the political system, when politicians and state agents entitled to make and enforce the laws in the name of the people, are using this authority to sustain their power, status and wealth. Political corruption not only leads to the misallocation of resources, but it also perverts the manner in which decisions are made. Political corruption is when the laws and regulations are abused by the rulers, side-stepped, ignored, or even tailored to fit their interests. It is when the legal bases, against which corrupt practices are usually evaluated and judged, are weak and furthermore subject to downright encroachment by the rulers.

Political corruption involves manipulation of policies, institutions and rules of procedure in the allocation of resources and financing by political decision makers, who abuse their position to sustain their power, status and wealth. As such, this type of corruption is also called institutionalized corruption as politicians and other officials—elected or otherwise appointed subvert their mandate to work for the benefit of the general public, instead focus on enriching themselves and their groups. Political corruption, when such practice becomes pervasive, can be considered systemic corruption.

Political Contributions: to politicians seeking office or already in one are allowable if done within the stricture of applicable laws. This is meant to protect political speech. However, corruption in political contributions can exist if, for example, a CEO spends a bunch of money on ads supporting a politician, creating some sort of a political debt. This is often referred to as “rent-seeking.”

Grand corruption

High level or “grand” corruption takes place at the policy formulation end of politics. It refers not so much to the amount of money involved as to the level in which it takes place: grand corruption is at the top levels of the public sphere, where policies and rules are formulated in the first place. This type of corruption distorts policies or the central functioning of the state, enabling leaders to benefit at the expense of the public good. Grand corruption is usually (but not always) synonymous to political corruption. Similarly, grand corruption can also be referred to as institutionalized corruption.

Kleptocracy (derived from Greek kléptō, "I steal", and krátos, "power, rule") is a political state of affairs where the rulers and powerful groups use their power to exploit the people and natural resources of their own territory in order to extend their personal wealth and political powers as opposed to working for the maximization of public good. Typically, this system involves embezzlement of funds at the expense of the wider population.

All dictatorships are kleptocratic.

When leaders make themselves powerful by stealing from the rest of the people, then it is called as Kleptocracy. The “pathway of kleptocracy” involves stealing from the state’s coffers and plundering national resources, obscuring the looted monies in the international financial system, often via multiple shell companies to hide the beneficial owners, and spending the corrupt proceeds on luxury purchases, such as high-end art, real estate, yachts and the like.

The diversion of assets by government officials is similar in structure and technique to the methods money launderers, Ponzi scheme operators and other criminal enterprises use.

Linkages with International Financial system

Kleptocracy is inherently multi-jurisdictional. To hide stolen loot, kleptocrats must move it across borders, and obscure it behind corporate structures that make it look legitimate. Transnational modern kleptocracy is behind many of the world’s most pressing problems, from terrorism and terrorist financing to war and famine. In practice, modern kleptocrats not only entrench themselves in the international financial system, they also embed themselves in the fabric of democratic societies, using public relations firms to whitewash their reputations and engaging in philanthropic activities to ingratiate themselves and avoid international scrutiny.

Institutionalized Corruption and the Kelptocratic state

This occurs when corruption in a system becomes endemic. Rather than decentralized and coincidental, corruption can be systemic and planned which subverts institutions and other practices established for the maintenance and safeguarding of the public good. This institutionalization of corruption leads to an overall change in the value-system and norms of behavior in a society. Some key factors of this type of phenomenon include:

• Where rule of law and protection of property rights are weak, powerful interests (including a dictator) create a system of patronage and loyalty through corrupt bureaucracy to safeguard their interests and power positions;
• If a small group or an individual is at the apex then structure of corruption is monopolistic if there are many powerful groups and individuals then competitive corruption patterns emerge;
• Such groups form in lack of rule of law or the inability of the formal/legitimate institutions’ failure to provide for the basic security of its people.
• In some cases groups organized to combat such state of affairs (such as chaos, lack of law and order) may transform into predatory teams upon gaining power
• This leads to the emergence of kleptocratic state from a state of anarchy and instability
• Control and loyalty in such a system is better understood by framing such arrangements as predator and the prey. The predatory team ensures loyalty and cohesion in its fiefdom through patronage by creating and fostering corrupt bureaucrats;
• The predatory hierarchy extracts rents from the economy and is based on a system of low civil service wages, cliques and secret affiliation and intelligence channels

Corporate Kleptocracy involves the same type of behavior whereby corporate executives use underhanded tactics to siphon off wealth at the expense of shareholders and in violation of their fiduciary duty.

Fraud:

Fraud is a broad term that refers to a variety of offenses involving dishonesty or "fraudulent acts". In essence, fraud is the intentional deception of a person or entity by another made for monetary or personal gain.

Fraud offenses always include some sort of false statement, misrepresentation, or deceitful conduct. The main purpose of fraud is to gain something of value (usually money or property) by misleading or deceiving someone into thinking something which the fraud perpetrator knows to be false. While not every instance of dishonesty is fraud, knowing the warning signs may help stop someone from gaining any unfair advantage over your personal, financial, or business affairs. Common types of fraud include:

• bankruptcy fraud; tax fraud (a.k.a. tax evasion); identity theft; insurance fraud; mail fraud; credit/debit card fraud; securities fraud; telemarketing fraud; wire fraud

Embezzlement:

Embezzlement involves fraudulent appropriation of assets (money or property) by a person in a position of trust or responsibility over those assets. It differs from larceny/theft in that the original taking was lawful, or with the consent of the owner, while in larceny/theft the felonious intent must have existed at the time of the taking. Embezzlement typically occurs in the employment and corporate settings. This typically involves manipulation of accounting records to hide theft of funds;