The World Bank’s Sanctions System:
Tackling Corruption Through a Two-Tier Administrative Sanctions Process
Promoting good governance and tackling corruption are critical to achieving sustainable development and poverty reduction. Diversion of funds from development projects through corruption impairs the ability of governments, donors, and the World Bank to achieve the goals of reducing poverty, attracting investment, and encouraging good governance.
One way that the World Bank combats corruption is through the use of administrative sanctions against firms or individuals who have engaged in fraud, corruption, coercion, collusion or obstruction (referred to collectively as Sanctionable Practices) in connection with World Bank-financed projects. The sanctions regime is designed to protect the funds entrusted to the World Bank, while offering the firms and individuals involved an opportunity to respond to the allegations against them.
There are five possible administrative sanctions: Public Letter of Reprimand, Debarment, Conditional Non-Debarment, Debarment with Conditional Release, and Restitution.
Allegations that a firm or individual engaged in a Sanctionable Practice are investigated by the World Bank Group’s Integrity Vice Presidency (INT). If INT believes there is sufficient evidence to substantiate the allegations, the case is referred to the Suspension and Debarment Officer (SDO)*—the first tier of the Bank’s two-tier administrative sanctions process.
The SDO reviews the evidence submitted by INT and determines if the evidence is sufficient to support a finding that the alleged Sanctionable Practice occurred. If so, the SDO issues a Notice of Sanctions Proceedings to the firm or individual alleged to have engaged in the Sanctionable Practice (the respondent). The Notice includes the allegations, the evidence as submitted by INT, and a recommended sanction. The SDO may also recommend the imposition of sanctions on affiliates of the respondent. Upon issuance of the Notice, the SDO temporarily suspends the respondent from eligibility for new World Bank-financed contracts, pending the final outcome of the sanctions process.
The respondent can choose not to contest the allegations or the recommended sanction, in which case the sanction recommended by the SDO is imposed. If the firm or individual contests the allegations or the recommended sanction, the case is referred to the World Bank Group’s Sanctions Board—the second tier of the Bank’s two-tier administrative sanctions process.
The Sanctions Board carries out a full de novo review in each contested case. It is not bound by the SDO’s recommendation. An administrative hearing may be held by the Sanctions Board either upon a party’s request or at the discretion of the Sanctions Board Chair. In its deliberations, the Sanctions Board considers INT’s allegations and evidence as attached to the Notice of Sanctions Proceedings; the respondent’s arguments and evidence submitted in response to INT’s allegations and evidence; INT’s reply brief; the parties’ presentations at a hearing, if applicable; and any other materials contained in the record.
After completing its review, the Sanctions Board determines whether it is “more likely than not” that the respondent engaged in a sanctionable practice. If so, the Sanctions Board imposes one or more of the aforementioned sanctions, which may extend to a respondent’s affiliates, successors and assigns. The decisions of the Sanctions Board are final and non-appealable.
Under the Sanctions Board Statute, the Sanctions Board consists of seven (7) members all external to the World Bank Group: three (3) members appointed by the Executive Directors, who must not currently hold any appointment to the staff of the Bank Group and shall be familiar with procurement matters, law, dispute resolution mechanisms, or operations of development institutions; and two (2) members appointed for each of IFC and MIGA by the Executive Directors, who must not currently hold any appointment to the staff of the Bank Group and shall be familiar with private sector cross-border lending and equity investments (for IFC Projects) or non-commercial guarantee operations (for MIGA Projects). Mr. J. James Spinner currently chairs the Sanctions Board. Information on the Sanctions Board’s membership is available here.
Since 2001, more than 400 firms and individuals have been publicly sanctioned by the World Bank (visit www.worldbank.org/debarr for the full list of debarred firms and individuals). Sanctions imposed by the Bank Group are published on its website at www.worldbank.org/debarr. For all cases initiated prior to 2011, publication is limited to the identity of sanctioned parties, the nature of sanctions imposed, and the provisions under which the sanctions are imposed (e.g., for fraudulent, collusive, or corrupt practices). For cases initiated from 2011 onward, publication extends to the full text of Sanctions Board decisions, with factual background and legal analysis, and SDO determinations (for uncontested cases).
Working with Member Countries, Civil Society, and Private Sector to Fight Corruption
The World Bank helps strengthen governance and address corruption through projects and programs that improve transparency in public financial management; strengthen tax and customs administration; enhance civil service performance; support legal and judicial reform; combat corruption; and enable local and central governments to deliver services and regulate the economy more effectively.
The World Bank’s assistance in improving governance and combating corruption is aimed at helping countries lift their people out of poverty by improving the delivery of basic services to the poor and creating growth and employment opportunities by encouraging private investment.
The World Bank also has a fiduciary responsibility to its stakeholders to ensure that development funds are used for the intended purpose of promoting development and reducing poverty, and are not jeopardized by corruption.
In March 2007, following extensive consultations, the World Bank Group’s Board of Directors approved a strategy to scale up assistance to improve governance and fight corruption in member countries, known as the Governance and Anticorruption Strategy (GAC). The GAC Strategy has three main pillars:
· Helping countries build capable, transparent, and accountable institutions
· Expanding partnerships with multilateral and bilateral development institutions, civil society, the private sector, and other actors in joint initiatives to address corruption
· Minimizing corruption in World Bank-funded projects by assessing corruption risk in projects upstream, actively investigating allegations of fraud and corruption, and strengthening project oversight and supervision
The World Bank’s two-tier sanctions process is a key component of the work being done within the World Bank to tackle corruption and promote good governance.
For more information on the sanctions regime and the GAC Strategy, please visit the following websites:
* The World Bank Group has four officers that oversee suspension and debarment decisions at the first tier, depending on the institution affected: (i) the IBRD/IDA (World Bank) Suspension and Debarment Officer (SDO); (ii) the Evaluation and Suspension Officer (EO) for International Finance Corporation (IFC); (iii) the EO for Multilateral Investment Guarantee Agency (MIGA); and (iv) the EO for investment projects guaranteed by the World Bank (known as partial risk guarantees or PRGs). The sanctions system for each of IFC, MIGA and PRG parallels that of IBRD/IDA, with a first level of review conducted by the respective EO and a second level of review conducted by the World Bank Group Sanctions Board.