Transparency International-USA along with Transparency International, Global Witness, the Open Contracting Partnership, Oxfam, Save the Children and 101 other organizations sent a letter to the World Bank Monday asking the Bank to collect and disclose the identity of all legal entity bidders on Bank-financed contracts.
The World Bank began an effort to reform its procurement policies in 2012 and this process is drawing to a conclusion, with new policies expected to be approved by the Bank’s board in July. To put their new procurement policies into practice, the Bank will be developing new procurement regulations over the summer and fall.
It is critical that the procurement guidelines include one key transparency provision — the disclosure of beneficial owners of anonymous companies.
Anonymous companies are often used to facilitate corruption in public procurement by allowing government officials to conceal their interests and those of their family and friends in the legal entities that may bid on procurements under their jurisdiction. By requiring that all legal entity bidders disclose their beneficial ownership information and then publishing this information, the Bank would be reducing opportunities for corrupt public officials and bidders to hide their conflicts of interest. Studies have shown that transparency can improve the quality of contracting, increase competition and lead to reduced costs.
The negative role played by anonymous companies is not limited to public procurement; these entities are also used to facilitate illicit financial flows, abuses in the extractives sector, kleptocracy and impunity. Developing and transition countries lose between $20-$40 billion/year annually to corruption which is equal to 20% -40% of official development assistance flows. Anonymous companies are frequently used to steal these public funds, thereby allowing the culprits to conceal their true identities.
The World Bank committed $40 billion in 2014 to support investments in such areas as education, health, public administration, infrastructure and natural resource management. The Bank has a responsibility to ensure that these monies do not fuel corruption. Present in over 120 countries, the Bank is well-placed to play a leadership role in the global fight in favor of transparency and against corporate anonymity.
We therefore urge the World Bank to send a strong signal about the importance of transparent procurement by collecting and disclosing the beneficial ownership information for all legal entity bidders.
Shruti J. Shah is a contributing editor of the FCPA Blog. She’s Vice President, Programs and Operations at Transparency International-USA. She can be contacted here.
Daniel Dudis is a Senior Policy Director for Transparency International-USA. He can be contacted here.