Five multilateral development banks (MDBs) sign cross-debarment agreement; additional regional development banks encouraged to participate.
Cross-debarment agreement multiplies impact of every decision taken by the Bank to debar corrupt entities.
As a result of investigations undertaken by the World Bank’s Integrity Vice Presidency (INT), the World Bank has debarred 399 firms, individuals, and non-governmental organizations, rendering them ineligible to participate in World Bank-financed contracts.
“With today’s cross-debarment agreement among development banks, a clear message on anticorruption is being delivered: Steal and cheat from one, get punished by all,” said World Bank Group President Robert B. Zoellick. "This action gives all our Banks a strong new tool to hold accountable firms that are engaging in fraudulent and corrupt practices in development projects, as well as a powerful incentive to companies to clean up their operations. The rules of the road have gotten tougher. This accord also underscores to our member governments that scarce development financing goes where it is intended.”
Under the agreement, entities debarred by one MDB may be sanctioned for the same misconduct by the other participating development banks, in effect closing a loophole that had previously allowed a firm that had been debarred by one MDB to continue obtaining contracts financed by other MDBs.
Participants in the cross-debarment signing included (from left to right): Lars Thunell, World Bank Group; Haruhiko Kuroda, ADB; Roberto Vellutini, IDB; Murilo Portugal, IMF; Philippe Maystadt, EIB; Donald Kaberuka, AfDB; Thomas Mirow, EBRD.
The accord is also intended to level the playing field for all firms competing for MDB-financed contracts. “We are exerting peer pressure to reduce the scope for corporate misconduct that undermines development work,” said Integrity Vice President Leonard McCarthy. “This is not only about catching the bad players. We want to work with corporations, but we want to put mechanisms in place that will keep those thinking about it out of trouble.”
This collective enforcement action validates the institutions’ September 17, 2006 commitment as part of the joint IFI Anti-Corruption Task Force to explore further how compliance and enforcement actions taken by one institution can be supported by the others. Under the 2006 agreement, the institutions agreed to harmonize their definitions of sanctionable practices and to share greater investigative information among the banks.
“Fraud in development projects disadvantages the most vulnerable. This agreement is an important signal that the development banks are making a concerted effort to sanction corruption around the world,” said Huguette Labelle, Chair of Transparency International (TI).
MDBs participating in the agreement will continue to manage their independent strategies to deter and prevent fraud and corruption in projects. However, the new agreement offers an opportunity to deepen the cooperation between participating MDBs on fraud and corruption risk management and creates opportunities for joint investigations where relevant.
Major Step in Advancing GAC Agenda
“As the Bank Group ramps up its commitments to support countries affected by the global crisis, we must assure our donors and client governments that we are responsible stewards of funds; that we are doing enough to guard against delinquent companies and risk-prone sectors; and that we are helping governments show their people, through governance and anticorruption efforts, that they can have confidence in government and public institutions,” said Zoellick.
The World Bank’s Governance and Anticorruption (GAC) agenda tackles fraud and corruption: project design, procurement, policy, and supervision. One of the practical outcomes of this accord is that it enhances international due diligence through a partnership approach. Together with other development institutions, the World Bank is exerting peer pressure to reduce the scope for corporate misconduct that undermines development work. “If a company that misbehaves, gets caught out, re-invents itself and seeks business elsewhere, it will likely find that the world is a smaller place as a result of this agreement,” statedMcCarthy.