For contractors that receive any funds from World Bank financing, the risk of getting caught in the Bank’s enforcement net has never been greater. And the effects are more severe. There are three key enforcement issues to note this year.
First, a strong trend exists towards sanctioning more entities. In just the first seven months of 2013, the World Bank blacklisted more than 250 entities. That’s a record number — more than four times the number of debarments issued in all of 2012. Notably, affiliates controlled by sanctioned entities are also typically debarred.
Second, the World Bank is increasing its use of alternative sanctions. It has penalized a further 91 contractors and consultants by imposing sanctions other than debarment, such as compliance and monitoring requirements. These measures can be costly and intrusive.
Third, the World Bank has increased the collateral consequences of sanctionable conduct. The Bank and other multilateral development banks now routinely “cross-debar” sanctioned contractors, meaning fraud or corruption in Africa with one bank will likely have implications for unrelated public procurement projects in Europe or Asia through another. In the words of former World Bank Group President Robert Zoellick: “Steal and cheat from one, get punished by all.” Additionally, the World Bank is more aggressively referring cases to national authorities and pushing prosecutors to follow-through.
Who is likely to be targeted? Five sectors comprise approximately two-thirds of the Bank’s investigations that can lead to debarment (healthcare, transportation, agriculture, water and energy).
What does it all mean? That the World Bank means business. It has become a major global regulatory player. It is sending a clear message on anti-corruption. And the aggressive pace of enforcement shows no signs of slowing.
Tim Coleman, pictured above, is a partner in the Washington, DC office of Freshfields Bruckhaus Deringer in the firm’s dispute resolution practice. He’s a former federal prosecutor in the Southern District of New York and was a member of the U.S. Attorney’s Securities and Commodities Fraud Task Force. He also served as Senior Counsel to the Deputy Attorney General of the United States in Washington, responsible for the President’s Corporate Fraud Task Force. He can be contacted here.
The author would like to acknowledge Freshfields associates Emily Holland and Jonathan Ware for their contributions.