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Jessica Tillipman
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Bill Steinman
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Julie DiMauro
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Thomas Fox
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Marc Alain Bohn
Contributing Editor

Bill Waite
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Shruti J. Shah
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Russell A. Stamets
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Richard Bistrong
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Eric Carlson
Contributing Editor

How does the European Investment Bank test for and monitor fraud risks?

The early identification of fraud risks or vulnerabilities in projects is a major concern of investors and international financial institutions. The European Investment Bank (EIB) undertakes Proactive Integrity Reviews (PIRs) to identify such potential vulnerabilities and major fraud risks in EIB-funded operations and projects.

Such reviews are not classic investigations that commence after EIB receives an allegation of misconduct or following reports published by local media. Instead, proactive reviews are based on a fraud risk assessment or a specific request from colleagues or management. They are therefore ways to identify weaknesses or gaps before fraudsters exploit them, or to identify fraudulent activity.

The Investigations team at EIB uses proactive tools to test for fraud risks, included some that we developed in-house:

Fraud and Integrity Risk Scoring Tool (FIRST).  This data-driven application was launched by the Investigations team in 2017. The data used by FIRST is refreshed daily, which enables the real-time monitoring of all active EIB operations through a combination of more than 50 algorithms. The tool uses both internal EIB data as well as external data in order to further strengthen the analytical power.

As a result of its proven success in identifying red flags, FIRST is integrated into the process of selecting projects for a full proactive review as well as contributing to the EIB’s risk appetite framework. Based on data from FIRST, a fraud index (FINDEX) is calculated on a quarterly basis to provide an overview of trends in fraud risk for EIB lending activities. This data is shared with colleagues in other EIB services, enabling them to leverage and respond to changing fraud risk insights.

An independent external assessment of the accuracy, quality, and overall performance of FIRST confirmed the business relevance of the risk factors and the ability to distinguish high and low-risk operations. In addition, the risk factors demonstrate expected stability over time, variability, and risk coverage.

Corruption Risk In Procurement on EIB-financed Projects (CRIP). This is a robotic tool for the continuous scoring of corruption risk and irregularity in procurement by EIB’s counterparties. It has been developed using “big data” from the EU Tenders Electronic Database. The scoring methodology assesses the risk of corruption against ten risk indicators, signalling aggressive procurement practices.

First used in 2021, the results produced by the CRIP robot are fully integrated in FIRST and shared within the EIB. CRIP is also used to prioritize the monitoring of projects, to assess the risk of corruption in procurement associated with existing or potential counterparties, as well as all other companies participating in public tenders in the European Union.

European Investment Fund (EIF).  In addition, we are applying the proactive methodology to the European Investment Fund (EIF, EIB’s private sector investment arm) with the support and assistance of their compliance function.

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The European Investment Bank and other multilateral development banks (MDBs) are developing further proactive initiatives. With appropriate adaptations, the methodology for proactive reviews can apply not only to public financiers of large infrastructure projects but also to commercial entities and other financiers/investors.

These proactive methods, combined with other efforts (by MDB Investigation teams, local law enforcement and a range of other international organizations like European Public Prosecutor’s Office (EPPO), European Union’s Anti-Fraud Office (OLAF), EUROPOL, INTERPOL, etc.), are intended to improve prevention/detection rates of fraud and corruption. They also provide a deterrent effect by reducing the temptation and ability to engage in misconduct in projects financed by MDBs and other investors.

Further details are available in the EIB’s Investigations Activity Report of 2021.

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Duncan Smith is Deputy Head of EIB Investigations, responsible for a range of policy, training, outreach, prevention and deterrence issues. As a barrister, he prosecuted corporate fraud & corruption offences for the SFO in the UK; in 2000, he joined the World Bank’s Investigations and later moved to a similar role at EIB. He is co-author of the IFI Anti-Corruption Task Force’s Uniform Framework Agreement (2006), various documents that harmonise MDB General Principles (including on Sanctions and Settlements) and EIB’s Anti-Fraud Policy. He is author of the books ‘Promoting Integrity in the Work of International Organisations: Minimising Fraud and Corruption’ and soon to be published ‘Fraud and Corruption: Cases & Materials’ (both published by Springer).

Anton Karadimov joined the EIB in 2018 and works in the Fraud Detection and Prevention Team. He has built data-analytical models for measuring the integrity risk of both EIB and EIF operations. He is also involved in the fraud risk assessment of the bank and assists with undertaking PIRs on selected high-risk EIB financed projects around the world. Prior to EIB, Anton has developed solid and diversified international multi-industry experience, operating successfully in the field of Internal Audit, Compliance, AML/KYC, Fraud Investigations/Detection and Data Analytics. He spent 12 years working as a fraud investigation consultant in the Big 4, fraud investigation manager in an American company based in France and anti-corruption auditor in a German industrial company. He is Registered Fraud Auditor by the Institute of Fraud Auditors in Belgium and Certified Fraud Examiner and Board member of the ACFE Luxembourg Chapter.

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