The World Bank Group Anti-Corruption Efforts & Sanctions System

Merly M. Khouw

Integrity Vice Presidency

Presentation to Global Delegation of Parliamentarians

October 11, 2017

The World Bank Group • Multilateral Development

Bank (MDB) – 189 member countries

• Financial & technical assistance to developing countries

• FY 17: $59 billion in loans, grants, equity investments, guarantees

WBG Goals • Ending extreme poverty by reducing

the percentage of people living on less than $1.90/day to no more than 3% by 2030.

• Boosting shared prosperity by maximizing income growth for the poorest 40% in every country in the developing world.

- President Jim Yong Kim, 2013

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WBG cares about fraud & corruption for…

• Economic Reasons – Corruption is a cancer on effective development – first articulated in

James D. Wolfensohn’s “Cancer of Corruption” Speech (1996)

– Christine Lagarde, IMF (Sept. 2016): “The annual costs of bribery alone – a subset of corruption – is estimated at a massive US$1.5–2 trillion dollars– roughly 2% of global GDP.”

– Corruption has been estimated to represent a 20% tax on foreign investment

– Protect Taxpayers $$

• Legal Reasons – WB Articles of Agreement: Ensure Bank funds are used with “due

attention to considerations of economy and efficiency;” Bank funds are to be used for their “intended purpose”

– This is the WB’s “fiduciary duty”

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2-year-old car not working; purchased too early before project started implementation

Incubators for hospital were purchased and never used

Non-functioning water pump

Why Fighting Corruption Matters

Finished classroom

Classrooms built according to quality standards

Functional school for girls in rural area

Why Fighting Corruption Matters

What can be accomplished when corruption is not a

factor.

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World Bank Anticorruption

Governance Global

Practice (GGP)

Stolen Asset

Recovery (StAR)

Operations Policy & Country Services (OPCS)

International Finance

Corporation (IFC)

Multilateral Investment Guarantee

Agency (MIGA)

Partial Risk Guarantee

Legal (LEG)

Integrity Vice

Presidency (INT)

Sanctions Board (SBS)

Office of Suspension

and Debarment

(OSD)

Doing Business

Major World Bank Players

5 Sanctionable Practices

1. Fraud 2. Corruption 3. Collusion 4. Coercion 5. Obstruction

These are defined in the following: • Consultant and Procurement Guidelines; • Sanctions Procedures; and • Anti-Corruption Guidelines for Borrowing Countries

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WBG INTEGRITY VICE PRESIDENCY (INT)

Supports Integrity by. . .

• Investigating fraud and corruption allegations in - WBG-financed operations (including Trust funds) - WBG staff & corporate vendors

• Seeking sanctions against entities who engage in misconduct

• Preventing misuse of funds by raising awareness, conducting targeted risk reviews, distilling lessons learned, and raising standards through integrity compliance programs

• Strengthening national and global anti-corruption efforts through information sharing and training

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www.worldbank.org/debarr Press release

Sanctions are public and published

In March 2010 the WBG and four other MDBs signed an

agreement for the mutual enforcement of debarment decision

Covers debarments that are public, over one year

Harmonized definitions of sanctionable practices

Cross-debarment automatic, subject to ‘opt out’ in exceptional

cases on legal/policy grounds

MDB Cross-Debarment

Enforcement is Making an Impact

*As of June 30, 2017 11

Enforcement Trends

Companies hiring third-

party agents who receive

or facilitate questionable

payments

Investigations can involve

multiple jurisdictions and

sectors, high-level officials,

and major corporations

Since 1999… 830 firms and individuals sanctioned by the

World Bank

265 MDB cross-debarments enforced by the World Bank

In just the last year. . . ~US$119 million safeguarded from award to

parties alleged to have engaged in sanctionable conduct

456 referrals made to national authorities in 101 countries

Prevention Investigative intelligence enables INT to advise Operations

on protecting the integrity of projects in the following ways:

Prevent contract awards

Rebid contracts

Remove tainted bidders

Declare mis-procurement and receive ineligible expenditures

Redesign projects with tighter controls

Lessons learned from investigations provide advice and training to staff in Operations

Referrals to national authorities remove tainted officials from projects and facilitate local enforcement if necessary

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http://www.worldbank.org/integrity

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www.worldbank.org/sanctions

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Thank you!