World Bank Group President Jim Yong Kim recalls the question Paul Volcker posed to a group of anti-corruption leaders assembled in Washington, D.C.: “If the World Bank doesn’t take the lead against corruption, who else is going to do it?”
The World Bank began imposing sanctions for fraud and corruption affecting its projects beginning in 1999 to force recipient jurisdictions to step up their anti-corruption initiatives.
In 2010, it brokered a cross-debarment agreement whereby the five signatory development banks honor one another’s debarments and hold all sanctioned entities to account for implementing compliance programs to regain eligibility to bid on World Bank projects.
The World Bank’s just-released Annual Update acknowledges that international bodies and nongovernmental organizations have promoted an anti-corruption agenda — heightening the world’s awareness of corruption in its many forms and spawning regional and multi-national initiatives to combat it — but that corrupt actors are undermining them with increasing sophistication.
The World Bank’s Integrity Vice Presidency unit reached out to anti-corruption leaders around the world to ask for their opinion regarding the biggest challenge to fighting corruption. Those persons ranged from the Secretary-General of the OECD to the Finance Minister of Nigeria to the Director of the UK’s Serious Fraud Office.
A number of these respondents highlighted the growing tension between developed and developing countries in which the financial systems of developed countries are facilitating corruption, but the greatest negative impact is borne by developing nations.
World leaders can commit to combating illicit money flows and illicit trade – but when developing countries are robbed of resources and cannot get them back — the process has failed them. Gaining their further commitment will be difficult, they said.
The Update also showcased the Bank’s commitment to using sanctions to address misconduct associated with any of their awarded contracts to deter wrongdoing and enhance fair competition.
In FY2014, of the 10 sanctions cases decided by the World Bank’s Sanctions Board, which involved 12 companies, six attested that they had taken steps to prevent fraud and corruption from occurring again. Of those six, four had received mitigating credit from the Sanctions Board for their remedial steps.
It noted the importance of investigating misconduct on a smaller scale, because these instances evidence weaknesses in supervisory controls and a commitment to ethics, essentially inviting further problems or collateral damage such as collapsing infrastructure, costly delays and direct financial losses. Again, often to countries that can ill-afford them.
Julie DiMauro works in the Governance, Risk and Compliance group at Thomson Reuters as a regulatory intelligence specialist. She can be followed on Twitter @Julie_DiMauro.