INT SUPPORT FOR PROJECTS Ι INTEGRITY VICE PRESIDENCY Ι WORLD BANK GROUP Ι June 23, 2011 Ι GAC In Projects Core Skills Workshop

Integrity Vice Presidency Vice President Leonard McCarthy Vice President Leonard McCarthy Director of Strategy & Core Services Galina Mikhlin-Oliver Director of Strategy & Core Services Galina Mikhlin-Oliver Director of Operations Steve Zimmermann Director of Operations Steve Zimmermann Policy & Special Projects Manager Core Services & Internal Investigations Manager Core Services & Internal Investigations Manager External Investigations Manager External Investigations Investigations Special Litigation Research & Analysis Preventive Services Preventive Services Core Services Internal Investigations Internal Investigations Forensic Services Integrity Compliance

3 FRAUD Any act or omission, including a misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation. COLLUSION Arrangement between two or more parties designed to achieve an improper purpose, including to influence improperly the actions of another party. CORRUPTION Offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party. COERCION Impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party. OBSTRUCTION (i) Deliberately destroying, falsifying, altering or concealing of evidence material to the investigation or making false statements to investigators in order to materially impede a Bank investigation into allegations of a corrupt, fraudulent, coercive or collusive practice; and/or threatening, harassing or intimidating any party to prevent it from disclosing its knowledge of matters relevant to the investigation or from pursuing the investigation, or (ii) acts intended to materially impede the exercise of the Bank’s contractual rights of audit or access to information.  Definitions found in: Consultant and Procurement Guidelines; Anti-Corruption Guidelines for Borrowing Countries (both revised in February 2011); Sanctions Procedures (amended 2010) Sanctionable Practices

Alternative Definition 4

INT Prevention Activities Business LineProducts (examples) 1. Advisory Engagements  Project Design – Risks and Mitigation Measures  Implementation Assistance – Reviews of Mitigation Mechanisms 2. Training and Capacity Building  Integrity Clinics for Bank Staff (monthly, hands-on)  AML Training for Anti-Corruption Agencies (Indonesia, Africa)  Forensic Audit Training for ACAs, Attorney General, Supreme Audit Authority (Indonesia, Philippines, Thailand, MNA)  Risk Identification and Mitigation for Borrowers and Contractors (South Asia, Africa) 3. Knowledge Products  Tools to Identify Red Flags and Conduct Risk Assessments  Corruption Awareness Handbook  Joint Work with ACAs

INT Prevention Activities Business LineProducts (examples) 4. Sector, Country and Implementation Reviews  Global Roads Review (published June 2011)  Health Sector/Pharmaceuticals Review (underway)  Review of CDD mitigation measures (underway) 5. Outreach and Collaboration  International Corruption Hunters Alliance (December 2010, Washington, DC); APEC Anti- Corruption Task Force  Memoranda of Understanding with anti- corruption authorities

INT Publications Most Common Red Flags in Procurement Corruption Awareness Handbook Self-Assessment of GAC Risks Collusion and Corruption in Road Operations (June 2011) Now in: Ch–En–Fr–Po –Ru–Sp

Handling an Allegation of Fraud or Corruption Bank Staff Duty (Staff Rule 8.01): Staff member has a duty to report suspected fraud & corruption in WBG-financed projects or in the administration of Bank Group business to direct manager or to INT. Manager has an obligation to report it to INT. Protocol for handling complaints and red flags (between INT and OPCS)*:  reporting of allegations of fraud and corruption related to procurement  INT case intake and prioritization and the INT investigation process  review of requests for no-objection for procurement transactions where there has been an allegation of fraud and corruption  follow-up with Borrowers *OPCS and INT Protocol, November 3, 2009 presently being updated 8

How to Move Forward With a Project Under Investigation 1.Operational decisions should not generally await the outcome of an investigation 2.Always consult with Regional Procurement Manager (RPM) on possible mitigation measures 3.Options depend on various factors, including:  stage of INT’s investigation  stage of the procurement process (i.e., before or after contract signing)  company under investigation in this versus another project  potential impact on Borrower (e.g., 80% of contract well implemented)  Sanctions are prescriptive (not retroactive) if work has begun 4.Not all INT investigations end up in sanctions 9

How to Deal with INT Investigation in a Successor Project 1.Closed INT case, publicly disclosed  relevant to the project (country and sector)  Refer to the case in the main text of the PAD and relevant annexes (address main findings) 2.Closed INT case that has not been disclosed to the public:  Discuss with INT whether to refer to the case in the PAD and agree on appropriate text 3.Open INT case (“Volker Trigger”)  Refer to case in the Memorandum to the President (MoP) after agreement with INT on appropriate text;  Be prepared to provide a technical briefing to the Board, if so requested  PAD should mention project/sector risks (without explicit reference to the INT case) and the risk mitigation measures to be put in place 10

11 Handling Allegations of Fraud & Corruption Take-Away Messages  Take complaints seriously but do not panic and be ready to dig deeper before making an informed decision  Beware that there are no quick fixes and these processes can take time – adjust your expectations and program your work program accordingly  Remember that not all complaints will end up as allegations and that not all allegations will turn into cases  Work collaboratively with others (FM, PS, etc.) to ensure that you comply with policies and manage the case in a smart manner  Be open and frank with the INT investigative team  Review the Final Investigative Report (Region has 30 days to comment)  Consider carefully when and how to alert your client  For those allegations that do not end up as full cases, still opportunity for preventive measures (seek services of INT’s Preventive Services Unit)