The European Investment Bank (EIB) recently published its Fraud Investigations Activity Report for 2018, reflecting the EIB’s ”zero tolerance” to fraud and corruption (and other Prohibited Conduct) that’s defined in the Bank’s Anti-Fraud Policy.
The Fraud Investigations Division, led by Bernard O’Donnell, is the sole office mandated to undertake investigations into allegations of Prohibited Conduct involving EIB Group-financed activities, as well as members of governing bodies or staff, through a team of highly skilled professionals.
The Inspector General, Jan Willem van der Kaaij informs (or reminds) readers in the Foreword to the Report that:
… according to the World Economic Forum, the annual global cost of corruption is around €3.2 trillion ($3.5 trillion) per year. The EIB is no different from other international and national institutions in terms of such risk. We are determined to mitigate these risks to the fullest extent possible. Our [Fraud Investigations Division] is well-placed to investigate and to gather the evidence needed for the Bank to take sound decisions.
The 2018 Activity Report addresses many subjects, including:
Investigations Team: The Report notes that the Fraud Investigations Division provides the EIB Group with the capacity to “professionally and objectively investigate allegations of Prohibited Conduct involving EIB Group-financed activities….”
Results: The Report notes that 184 allegations of Prohibited Conduct were received (a large rise from 149 the year before), 52 were closed at the case intake/assessment stage. The Report also notes that 31 percent of allegations were received from external sources (including press reports), 1 percent were anonymous and 68 percent were received from internal sources; 46 percent of reports of external cases concerned EU countries, with 54 percent concerning non-EU countries.
Case Studies: There are 12 case studies giving a sense (without going into detail) of the sort of cases that the Fraud Investigations Division has investigated and the Bank has resolved, including internal cases that involved cheque fraud and external investigations related to fraud and corruption in project procurement, collusion in contract award and fraudulent representations.
Proactive Integrity Reviews: This is an approach that has been developed by the Fraud Investigations Division to check for fraud and corruption which went undetected through regular monitoring. It has also developed a Fraud Risk Scoring Model to select the projects subject to Proactive Integrity Reviews and successfully tested this new methodology in 2018. At the end of 2018, the Fraud Investigations Division had five Proactive Integrity Reviews ongoing on eight EIB projects worth approximately €631 million ($696 million).The Proactive Integrity Reviews check that funds are being used for the intended purpose and to assess the project’s vulnerability to Prohibited Conduct, to look for red flags of fraud or corruption, to identify possible gaps in delivery or controls in monitoring or the need for remedial action and/or whether a full investigation is required.
Deterrence/Rehabilitation: In 2018, IG/IN launched a new EIB webpage, containing a list of entities publicly excluded from EIB-financed projects and activities, as well as a list of historical settlement agreements reached between EIB and the respective parties. In 2018, EIB signed an agreement with Volkswagen AG following which the latter was excluded from participating in any EIB project during a period of 18 months and will contribute €10 million ($11 million) to environmental and/or sustainability projects in Europe.
MoUs: Strengthening international cooperation is a key factor in fighting against fraud and corruption. In this respect, Memoranda of Understanding are signed with partner national law enforcement, prosecution offices and anti-corruption agencies to facilitate cooperation in cases of mutual interest. In 2018, the EIB signed agreements with the Moldovan National Anti-Corruption Centre, the National Anti-Corruption Bureau in Ukraine, the Anti-Corruption Agency in France and the Office of the Prosecutor General in Hungary.
Increased Awareness: The Fraud Investigations Division not only undertakes investigations, but also increases awareness among EIB Group staff members about Prohibited Conduct. In 2018, more than 600 EIB Group staff attended training, the Fraud Investigations Division organized seven internal awareness-raising events and hosted the third EIB Group Anti-Corruption Conference.
“Integrity Matters” photography competition: There was a special initiative in 2018 whereby the Fraud Investigations Division suggested that the EIB staff photography competition carry a special category concerning “Integrity Matters,” with a picture of the winning entry.
Future Challenges: As in previous years, the number of incoming allegations may increase, hence requiring more efforts to fulfil the core activity of investigation. However, the Fraud Investigations Division will also continue to work to strengthen fraud and corruption awareness inside the EIB Group as well as increase external outreach by engaging with representatives of civil society organisations, national and international partners.
Duncan Smith is Deputy Head of Fraud Investigations at EIB, responsible for a range of policy, training, outreach, prevention and deterrence issues. After being called to the Bar, he spent 10 years prosecuting at the UK’s DTI and Serious Fraud Office. He joined World Bank’s Investigation Unit as Team Leader then policy/debarment adviser, moving to EIB in 2007. He’s co-author of the IFI Task Force’s Uniform Framework Agreement (2006) that harmonized the definitions of fraud and corruption across the multilateral development banks.