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The European Investment Bank’s 2020 Fraud Investigation Activity Report is an important compliance resource

The European Investment Bank’s Investigations Division (IG/IN) is mandated to investigate allegations of “Prohibited Conduct” involving EIB Group-financed operations and activities, or allegedly involving members of governing bodies or staff. The IG/IN team include former prosecutors and former law enforcement personnel, forensic accountants, and lawyers.

The EIB’s 2020 Fraud Investigation Activity Report provides details of this work by the Investigations team for the EIB Group (EIB & the European Investment Fund). The Report is prepared every year and is published for the benefit of EIB staff and interested external parties, in part to raise awareness of fraud and corruption risk in the activities the EIB finances.

Prohibited Conduct (fraud, corruption, collusion, money-laundering etc.) affecting European Investment Bank projects is defined by the EIB’s Anti-Fraud Policy (based on the harmonized definitions in the earlier MDB’s Uniform Framework).

The integrity/investigation functions at each Multilateral Development Bank (World Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, African Development Bank, and Asian Development Bank) prepare and publish annual activity reports, describing their work in prevention, deterrence, investigation, and remediation of fraud and corruption issues in the projects and activities the organizations are financing.

The EIB’s Investigations Division Charter sets out the mission, scope of work, authority, and core principles of the Investigations Division.

Its 2020 Activity Report notes the difficulties of investigating during the pandemic:

Conducting fraud investigations during the COVID-19 pandemic posed many challenges for the Fraud Investigations Division and national and international partner investigative offices. The crisis caused uncertainty and disruptions in business, which increased the risk of fraud worldwide and presented opportunities for fraudsters to exploit these disruptions to their advantage. In addition, the COVID-19 crisis mobilised many resources to support businesses, health initiatives and economic growth, and these funds were an attractive target for prohibited conduct.

Werner Hoyer, president of the European Investment Bank, says in his foreword to the 2020 Activity Report,

The Inspectorate General’s Fraud Investigations Division helped develop the framework supporting the Bank’s COVID-19 response, which provides much needed assistance in the immediate health-related emergencies and roll out measures aimed at containing the economic effects of the crisis. The EIB Group’s investigators also demonstrated their flexibility by implementing astute investigation plans tailored to the pandemic.

Highlights of the work of the EIB’s Investigations Division during 2020 include:

  • Development of a robotic tool for measuring corruption risk in procurement for existing or potential counterparties
  • 52 recommendations and opinions issued and implementation of a new system for following up and reporting on recommendations and opinions
  • Negotiation of a remediation agreement with Hyundai E&C and JSC Nenskra Hydro under the Nenskra project in Georgia (also noted on EIB’s website here)
  • Decreased backlog: more cases closed (195) than opened (183) in 2020
  • A new Memorandum of Understanding between the EIB and the Asian Infrastructure Investment Bank on cooperating in investigations, and
  • Release of a video for EIB staff on the International Anti-Corruption Day in December.

The 2020 Activity Report includes a number of case studies. For example, in a case of corruption involving an EIB Group counterparty, national authorities investigated and arrested persons suspected of having committed a series of crimes and irregularities in breach of national banking law. One of the persons arrested was the director-general of an EIB Group counterparty.

In another case study, individuals falsely claimed to act as intermediaries for the EIB and asked multiple companies for payment of commission fees to help them obtain an EIB loan. When the loan did not materialize, the victims contacted the EIB.

In another case, the EIB received a series of anonymous allegations questioning the technical and financial capacity of a joint venture recommended for a contract in a project in Africa co-financed by the EIB. IG/IN’s investigation confirmed that the experience credentials submitted by the joint venture to pre-qualify for the tender were fraudulent. As a result, the joint venture was disqualified from the project procurement process.

Another case involves a business that was the victim of a fraudulent investment scheme in which a company claimed to act as intermediary in submitting a loan request to the EIB. The victim paid over €100,000 (about $118,000) to the alleged intermediary, who purported to submit a loan request to the EIB in exchange for the payment. The victim believed the company was legitimate because its name appeared in an EU official register (not managed by the EIB Group). The IG/IN advised the victim to submit a complaint to the relevant national authorities. IG/IN also provided evidence of the company’s fraudulent actions to the authority in charge of maintaining the register. The company was excluded from the register.

A further resource readers of the FCPA Blog may want to access are Proactive Integrity Reviews conducted by EIB. Those were described previously in articles published by the Basel Institute of Governance (May 2020) and the FCPA Blog (November 2019).

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Duncan Smith is Deputy Head of Investigations at EIB. After qualifying as a lawyer, he prosecuted fraud & corruption offences for the UK’s Department of Trade & Industry and Serious Fraud Office. After working for the World Bank’s Investigation Unit (as Team Leader then policy/debarment adviser), he moved to EIB to address policy, training, outreach, prevention and deterrence issues. He is co-author of the IFI Anti-Corruption Task Force’s Uniform Framework Agreement (2006) & other MDB harmonized documents and regularly joins MDB integrity meetings. He is author of a new book: Promoting Integrity in the Work of International Organizations: Minimizing Fraud and Corruption in Projects.

Catalina Manea is a Policy Officer in IG/IN. She co-wrote the Fraud Investigation Activity Report 2020. Before joining the EIB, she worked at the European Commission’s Anti-Fraud Office (OLAF) in Brussels where she was in charge of global partnerships and outreach. She holds degrees in politics and international relations from the University of Münster, Germany and the Babes-Bolyai University, Romania and a PhD in Philosophy from the University of Münster.

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