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David Theis, (202) 458-8626 dtheis@worldbank.org Bart Stevens, (202) 458-2563 bstevens@worldbank.org WASHINGTON, February 6, 2007—The World Bank continues to take a leadership role in the fight against fraud and corruption, investigating and closing more than 400 cases involving Bank-financed projects over the past two fiscal years and sanctioning over 100 entities for engaging in wrongdoing in projects, according to a new report. “There are more than 1 billion people worldwide surviving on $1 a day, and corruption threatens their hopes for a better quality of life and a more promising future,” said World Bank President Paul Wolfowitz. “When we find that scarce development dollars have been wrongly diverted from their intended purpose of benefiting the poor, we have a responsibility to take action. INT’s work helps us to fulfill this obligation to the poor, who are our ultimate clients, by detecting and deterring fraud and corruption, and by working with others across the Bank to mitigate risks in future operations.” Over the past two fiscal years, the World Bank Group’s Institutional Integrity Department (INT) investigated and closed 441 external investigations into fraud and corruption in Bank financed projects, says the Integrity Report of the World Bank Group, Fiscal Years 2005 - 2006. As a result of such investigations, the Bank debarred 58 firms and 54 individuals due to fraud and corruption over the period covered in the report, rendering them ineligible to participate in Bank-financed projects. Since 1999, the World Bank has sanctioned 338 firms and individuals, with all sanctions published on the Bank’s website and publicly announced. The World Bank is the only multilateral development bank that has published the names of the firms it has sanctioned for corrupt practices—a major deterrent to wrongdoing. The report also finds that the Integrity Department completed 227 internal cases involving staff misconduct over the past two fiscal years. Of these, INT substantiated allegations in 77 of the cases involving 78 staff members. Equally important, after investigating the allegations, INT cleared the staff members of any wrongdoing in 44 internal cases. The remaining allegations were either unsubstantiated (46 cases), meaning the evidence was inconclusive, or referred (60 cases) to others in the institution for resolution. As a result of the substantiated allegations, the Bank terminated and/or barred from rehire 22 staff and disciplined 11 others for fraud and corruption; terminated and/or barred from rehire five staff members for sexual harassment; disciplined five for failure to comply with personal obligations; terminated and/or barred from rehire seven others for conflict of interest or other violations; and disciplined four others for conflict of interest or other violations. The remaining 24 staff brought themselves into compliance with their legal obligations as a result of INT’s intervention. The report makes clear that the number of serious allegations involving Bank staff members represents less than 1% of the institution’s total workforce. The Integrity Department was established in 2001 as the independent investigative arm of the Bank. INT investigates allegations of fraud and corruption in Bank-financed projects, as well as allegations of possible staff misconduct, and refers its findings to decision makers such as the Bank’s Sanctions Board (for external cases) and the Human Resources Services Vice President (for staff misconduct cases) for further action. When appropriate, the Department also refers its investigative findings to the authorities of relevant member countries for further action. The largest single source of allegations received by INT in Fiscal ’06 was World Bank staff and consultants, at 32% of all allegations, the same percentage as the previous fiscal year, according to the report. The nature of the allegations received related to lending activities during FY05 and FY06 included procurement fraud, collusion, kickbacks and bribes, the misuse of project assets, and misrepresentation of qualifications in bid submissions. “Corruption has a devastating impact on the capacity of governments to function properly; on the private sector to grow and create employment; on the talents and energies of people to add value in productive ways; and ultimately on societies to lift themselves out of poverty,” said Suzanne Rich Folsom, Director of the Institutional Integrity Department. “The World Bank, and the Integrity Department, must continue to do everything possible to ensure that the funds entrusted to our institution by its shareholders are used for their intended purposes.” One overarching finding from the investigations into fraud and corruption in Bank-financed projects is that the schemes devised by corrupt actors are broadly similar whether in Africa, Asia, Europe, Latin America, or the Middle East. This is a critical lesson learned, as it is allowing INT to devise common interventions on a Bank-wide basis. But while INT has now gained a deep and growing understanding of the nature of vulnerabilities to corruption in Bank-financed projects, knowledge of the frequency, scope and depth of the problem is less certain, says the report. This is partly because the allegations INT receives are only a subset of the entire universe of corrupt activities, but also because INT has a finite ability to actively investigate all the allegations it receives. Throughout Fiscal Years 2005 – 2006, the report states, INT was developing a Voluntary Disclosure Program (VDP), the concept for which was originally approved by the Bank’s Board of Executive Directors in Fiscal ‘04. The detailed programmatic elements were approved by the Bank’s Board in Fiscal Year 2007 and the VDP was officially launched on August 1, 2006. The VDP gives firms involved in contracts related to Bank projects the opportunity to: cease corrupt practices; voluntarily and fully disclose information about misconduct that is sanctionable by the Bank; adopt a compliance program monitored for three years by a Compliance Monitor; and avoid public debarment for disclosed past misconduct. The firm obtains confidentiality in exchange for full and proactive cooperation. The report describes another proactive diagnostic tool used by INT: the Detailed Implementation Review, or DIR. Conducted in cooperation with country offices, a DIR is designed to review Bank-financed projects by focusing on identifying irregularities or irregularity indicators of fraud, collusion, and corruption in the procurement and disbursement process, in contract management, and in the implementation stage of projects. The report notes that the Bank conducted a DIR in Cambodia in Fiscal Year 2005, which revealed a number of instances of irregularities, including a lack of competitive bidding and questionable financial management. Building on the experiences of this and previous DIRs, which have been in use since 2002, the Bank and the countries involved have identified remedial measures to lessen the incidence of fraud and corruption in Bank-financed projects. INT’s primary objective is to investigate allegations of fraud and corruption in Bank projects and allegations of staff misconduct including, but not limited to, fraud and corruption. However, the report describes how the Bank is now working to achieve a more effective balance of reactive and proactive/preventive approaches. The report notes that the Integrity Department has been requested by the President to provide more “upstream” risk-mitigation advice, guidance, and recommendations concerning future lending operations. The report states that the Integrity Department has over 50 staff and consultants working on investigations and related issues, and annual expenditures of more than $10 million a year. -###- To view the full text of the report, please visit the INT web site, or click here. |
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