Investigating and Sanctioning Fraud and Corruption in World Bank-financed Projects By:

1. Integrity for A Better Development Outcome Investigating and Sanctioning Fraud and Corruption in World Bank-financed Projects By: Vyacheslav ANFINOGENOV Europe and Central Asia Regional Team Leader World Bank Group Integrity Vice Presidency October 27, 2010 Brussels, Belgium

2. INT’s Mandate Integrity for A Better Development Outcome • Created in 2001 as an operationally independent unit that reports directly to President, INT today is a VPU with more than 100 highly qualified staff • Investigating of fraud and corruption allegations in WBG-financed operations and significant allegations of fraud and corruption involving staff • Sanctioning of firms and individuals that have engaged in one of five sanctionable offences under WBG-supported activities • Preventingof integrity risks through better risk identification and adoption of effective mitigation measures • Enhancing integrity due diligence of high risk entities to better inform operational decisions (especially in the context of private sector products of IFC and MIGA) 2

3. What is sanctionable by the World Bank Group? Fraud Corruption Collusion Coercion Obstructive Practices Definitions are spelt out in Consultant and Procurement Guidelines, Sanctions Procedures, Anti-corruption Guidelines for borrowing countries. Integrity for A Better Development Outcome

4. Who Can Be Sanctioned? 4 • Companies and individuals that have received Bank-financed contracts and engaged in sanctionable misconduct • Not subject to sanctions: • Member country governments / government officials Integrity for A Better Development Outcome

5. How we investigate? • Debrief the complainant • Review relevant documents (procurement, financial management, project reports, correspondence) • Conduct analysis to identify bidding patterns and additional witnesses • Visit the site to examine implementation • Interview witnesses (losing bidders, project staff) • Interview subject Integrity for A Better Development Outcome

6. The Investigative Process 6 Integrity for A Better Development Outcome

7. Making INT Investigations More Effective • New Partnerships with MDBs, IFIs and regional anti-corruption networks to share information, conduct parallel investigations, and improve referral processes • The Voluntary Disclosure Program • Strategic use of settlements • Debarment with conditional release as a baseline Integrity for A Better Development Outcome

8. Innovative investigations Integrity for A Better Development Outcome 8 • Satellite images allow INT to prove fraud in conflict zone • Area in red should have had new school built on site

9. What happens after INT concludes an investigation? 9 investigativereport WORLD BANK GROUP President and staff misprocurmentcontracts cancelledcontract review referralreport officials suspendedinvestigationproject review GOVERNMENTS redactedreport PUBLIC Proposed Noticeof SanctionsProceedings WORLD BANK EVALUATION & SUSPENSION OFFICER Sanctions Board Integrity for A Better Development Outcome

10. Confidentiality and Process • The Bank protects the confidentiality of complainants • The Bank accepts anonymous allegations • The Sanctions Procedures provide fairness in dealing with decisions to impose sanctions Integrity for A Better Development Outcome

11. INT Referrals • Governments use referrals only to undertake their own investigations, not as the sole basis for administrative, criminal, or civil action • INT provides additional information & technical assistance when requested Integrity for A Better Development Outcome

12. How are referrals made?

13. How can INT assist in follow-up? • Can we identify a permanent point of contact in our mutual offices? • The Bank can offer information and technical assistance to your office • INT seeks status updates on referrals Integrity for A Better Development Outcome

14. Preventing Corruption Through Administrative Sanctions: A Two-tier Sanctions Process 14 Investigation Integrity Vice Presidency(INT) Evaluation and Suspension Officer (EO) • Proposed Sanction 1st Tier • Sanction Sanctions Board Integrity for A Better Development Outcome 2nd Tier

15. Types of Sanctions 15 • Debarment • Letter of Reprimand • Conditional Non-Debarment new • Debarment with Conditional Release new • Restitution new • More flexibility for the Bank • More incentives for companies to cooperate Integrity for A Better Development Outcome

16. Cross Debarment: Raising the cost of corruption • “Steal and Cheat from one: get debarred by all,“ Robert B.Zoellick, President World Bank Group • Agreement with 5 MDBs including: AfDB, ADB, EBRD, IDB, WBG • The first global enforcement mechanism harmonizing sanctions’ definitions and action • Each MDB maintains its independent sanctions system • Effectiveness as of July 1st 2010 to all new contracts under existing and new Bank-financed projects 16 Integrity for A Better Development Outcome

17. INT’s Disclosure Policy • List of debarred companies • For Bank TTLs: Company Risk Profile Database • Redacted investigative reports • Annual reports • Independent Advisory Board Reports www.worldbank.org/integrity Integrity for A Better Development Outcome

18. Sanctions Are Public Debarred Companieswww.worldbank.org/debarr

19. Introducing VDP A program created by the World Bank’s Integrity Vice Presidency to better engage the private sector in the Bank’s anticorruption efforts. Participants disclose information about bribes, kickbacks, and other misconduct they have committed in Bank-financed contracts and change their ways through a Compliance Program—while remaining eligible to bid on future contracts and while maintaining confidentiality. Integrity for A Better Development Outcome

20. How to Report an Allegation EMAIL investigations_hotline@worldbank.org FRAUD & CORRUPTION HOTLINE—24 hrs/day & anonymous 1.800.831.0463 (inside US) 1.704.556.7046 (outside US) INT AT HEADQUARTERS202.458.7577 (p) 202.522.7140 (f) • MAIL PMB 3767 13950 Ballantyne Corporate Place Charlotte, NC 28277 Integrity for A Better Development Outcome