The Bank has a number of anticorruption tools with direct application to its operations, including anticorruption provisions in its legal agreements with borrowers and other recipients of Bank financing, and certain practices and procedures, particularly in the area of procurement, aimed at reducing the risk of, or detecting and addressing, potential fraud and corruption in Bank-financed operations.
The 2006 Sanctions Reforms resulted in a number of changes to the Bank’s legal framework for operations. Most significantly, the reform introduced Anticorruption Guidelines for Investment Lending Operations which, like the Procurement and Consultant Guidelines and the General Conditions, are incorporated by reference into the Bank’s loan and financing agreements. The Anticorruption Guidelines contain expanded definitions of fraud and corruption that cover the use of all loan proceeds, and contain a number of actions to be taken by the borrower and other recipients of loan proceeds to prevent and combat fraud and corruption in Bank-financed projects. Following the introduction of the Program-for-Results (PforR) financing instrument, the Bank adopted specific Anticorruption Guidelines for PforR which are based on the Anticorruption Guidelines for Investment Lending with appropriate adaptation to the characteristics of the new instrument. More information can be found on the legal aspects related to anticorruption in PforR operationswebpage.
The Procurement and Consultant Guidelines establish as Bank policy the requirement that borrowers and loan beneficiaries, as well as bidders, suppliers, contractors and consultants, maintain the ‘highest standards of ethics’ and, to this end, further provide for Bank sanctions as well as contractual remedies in the event that certain defined forms of fraud and corruption occur in connection with the procurement/selection or execution of Bank financed contracts. The Guidelines also allow the Bank to access bid and contract documentation through the so-called ‘third party audit clause’.
The Bank has remedies under the IBRD and IDA General Conditions that allow the Bank to cancel an amount of the loan equivalent to any Bank financed contract if it had been tainted by corruption and to suspend disbursements, in whole or in part, in the event that fraud and corruption occurs without timely and appropriate action being taken to address the situation.
The Anticorruption Guidelines, like the Procurement and Consultant Guidelines, are incorporated by reference into the Bank’s legal agreements. The Anticorruption Guidelines set out the harmonized definitions of Sanctionable Practices, as well as a set of undertakings by the Borrower and other recipients of Bank funds aimed at preventing and combating fraud and corruption in connection with the use of such funds. The Guidelines also establish the Bank’s right to sanction firms and individuals found to have engaged in any fraud and corruption in connection with the use of loan proceeds, not only in connection with procurement. The Bank has developed commentaries on the Anticorruption Guidelines as a useful source for their interpretation.
IFC, MIGA and Partial Risk Guarantee (PRG) operations form an integral part of the World Bank Group sanctions regime, and parties in these operations may be sanctioned for corrupt, fraudulent, collusive, coercive, or obstructive practices, in addition to being subject to contractual remedies for these same offenses. IFC, MIGA and PRG have operationalized the sanctions regime through the inclusion of appropriate provisions in their financing/guarantee documents, technical assistance agreements and other documentation. Each entity has adopted guidelines attached to their legal agreements, which further explain the definitions and provide examples relevant to the private sector operations. IFC discloses the sanctions process to prospective partners through its "mandate letter," which defines the scope and basic terms of IFC’s investment.
In addition to the legal tools outlined above, the Bank has recently developed a number of non-legal tools to help in its anticorruption efforts. Perhaps the most significant of these tools is the Company Risk Profile Database (CRPD), a database of firms and individuals under investigation by the Integrity Vice Presidency (INT). The CRPD assists Bank operational staff in assessing if a company or an individual being considered for a tender award poses a fiduciary risk. The database is not a basis for objecting to a contract recommendation, but a tool to focus further inquiries. Access to the database is provided to IFC and incorporated into its own due diligence processes.
Following the Volcker Panel recommendations, prevention has become a major focus of INT’s work. To this end, it has established a Preventive Services Unit (PSU) composed of specialists in operations from across the Bank with expertise in various sectors, including legal and judicial reform, infrastructure, and social sectors. The mandate of the PSU includes a review, analysis and publication of fraud and corruption risks in Bank-supported operations, based on lessons learned from INT’s investigative work, allegations trends, and other INT information. The PSU uses this knowledge to provide just in time advice to operational colleagues regarding mitigation of integrity risks in Bank operations at the design and implementation stages. It also translates this knowledge into various preventive tools (including, for example, the Fraud and Corruption Awareness Handbook, and the Red Flags tools brochure) and practical training and capacity-building materials utilized to raise awareness of fraud and corruption risks and appropriate preventive measures with colleagues inside and outside the Bank.
At an early stage in the design of the projects and programs, the Bank assesses the fraud and corruption risks and their drivers, and then focus mitigation efforts at the national or sectoral level the project or program could support, typically including: (a) support for improved budget execution at the sectoral level, (b) improving line ministry capacity and incentives to undertake economic analysis of projects and plan investments, (c) developing more robust regulatory institutions and (where feasible) competitive provision under light regulation, (d) changing incentives to improve the accountability of state-owned enterprises and other government-controlled service delivery providers, (e) supporting enhanced information disclosure and beneficiary or civil society “demand-side” oversight mechanisms, including community-driven approaches and (f) improving line ministry procurement and financial management processes.
For 'high risk' Bank financed operations, the Bank works with its borrowers to develop an anti-corruption action plan that spells out specific measures to mitigate the fraud and corruption risks through enhanced transparency, accountability and participation. Elements of anti-corruption plans typically include enhanced access to information, civil society oversight, strengthened procurement and/or financial management and arrangements within the project structure for sanctions and remedies to deal with cases of misconduct.