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Harry Cassin
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World Bank follows DOJ by evaluating corporate compliance programs

The World Bank’s enforcement arm, the Integrity Vice Presidency (INT), signaled this month they are mirroring initiatives first put forth by U.S. law enforcement. Specifically, INT indicated that they are investing significant resources into formally evaluating companies’ compliance programs during an investigation.

The initiative, announced during a World Bank colloquium on suspension and debarment that’s now available online, marks a shift from INT’s previous practice of looking at compliance safeguards only after a sanction had already been handed down. The new approach comes on the heels of a new version of the DOJ’s “Evaluation of Corporate Compliance Programs,” which sets out the specific criteria prosecutors will evaluate when determining whether compliance efforts warrant a reduced penalty.

INT’s move in the same direction is significant in that it underscores the similarities between how law enforcement and MDBs are combating fraud and corruption, as well as MDB investigators’ continuing evolution into a powerful regulatory force in their own right.

Like the DOJ has long done, INT’s scrutiny of compliance programs will likely focus on function over form—in other words, INT will consider how well they work in practice, irrespective of how robust they may seem on paper. This presents companies who receive MDB funding with both risk and opportunity.

The risk is that companies will not get any meaningful credit for impressive-sounding (but ineffective) compliance procedures or be able to claim ignorance as to what specific types of compliance programs MDBs expect to see. Especially in countries where compliance cultures may not yet reflect best practices, this means companies will need to evaluate proactively and potentially revamp their compliance programs before an MDB investigation begins to argue for mitigation of any potential sanction.

While this will no doubt involve an upfront investment of time and resources, it simultaneously creates an opportunity for those companies to garner a greater share of MDB contracts. As INT itself has stated, their overall goal “is for compliant companies to ultimately crowd out bad actors.” In other words, compliance expenditures will generate worthwhile “bang for the buck” by softening the financial blow of a sanction and helping to win more work.

With the World Bank’s recent reaffirmation of its commitment to spend upwards of $160 billion through June 2021 to help developing countries fight the coronavirus pandemic, the economic incentives to fall into line with INT’s compliance expectations are significant. Large chunks of this funding have already begun to flow out, including several $100 million loans to Serbia, Uzbekistan, and other countries in the Baltics and Central Asia.

While the MDBs’ aid packages are being issued on an accelerated timeline in light of the urgency of the present situation, recipients should not mistake speed for a decision to neglect in-depth investigations of how this money is spent.

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