1 INETGRITY FOR BETTER RESULTS Fiduciary Forum, March 2010 Leonard McCarthy Integrity Vice President

INTEGRITY FOR BETTER RESULTS 2 A NEW INT: 1. Volcker recommendations: An accelerated impact on the anticorruption front 2. We are partners in the GAC strategy: We work for one company 3. We are in the Integrity business to advance development effectiveness 4. An INT team that reaches inside and outside the institution to achieve BETTER RESULTS

INT’s STRATEGY AND TOOLS 3 1. The Bank is a Cooperative Trust: Corruption is a moving target 2. An enhanced investigative capacity to impact the quality, relevance and timeliness of investigations 3. Bring the minimum prosecutable case at the speediest time 4. A new Preventive Services Function: As Einstein once said: “Intellectuals solve problems and geniuses prevent them” 5. TOOLS: Fraud and Corruption Manual, ETS, CRPD, Cross Debarment, Proactive Forensic Audits

WHAT DO WE FIND? The vulnerability to fraud and corruption is where money changes hands 4 A “connected” company representative explained to the headquarter manager: “understand that we had to make certain arrangements to get the contract. Don’t worry, we will handle everything” In another case, the company representatives documented corrupt payments on spreadsheets using initials of public officials as line items and debated how much to assign each According to another company representative, direct negotiations took place with a minister to “buy justice and surrender”. The company ended up paying (x*) percent as requested by the minister because another bidder had offered to pay more Another company representative stated “uninvoiceable expenses” including airfares, dinners, etc. to project officials One witness stated that the colluding firms and officials entered into a joint venture to manipulate the procurement process * Due the confidentiality of information relating to investigations, the exact percentage cannot be disclosed

A PRACTICAL EXAMPLE: How we can work together: Home Construction Project 5 A Focus on People & Results: Development Effectiveness Fiduciary inputs: “A Risk Focus” in fiduciary assessment and supervision to address weaknesses in the control environment INT inputs: “An evidence-based perspective” of global and regional patterns of fraud and corruption and how we can prevent and mitigate risks

INTEGRITY FOR BETTER RESULTS: Challenges at the next level 6  Most of the complaints INT receives are based on allegations first sensed by the ears, eyes and antenna of Bank staff  INT’s investigations have identified four important challenges for operations: 1. How to mitigate the risk of doing business with companies strongly suspected or known to be corrupt or fraudulent actors? 2. How to engage in important -but from a F & C perspective- high risk projects or sectors? 3. How to maintain a consistency in compliance levels in the sectors and countries where we have left a mark? 4. How to expand and champion tools to assist Borrowers’ efforts to recover “corrupted” funds?

INTEGRITY FOR BETTER RESULTS The need for innovative approaches 7 “Our worst enemies here are not the ignorant and simple, however cruel; our worst enemies are the intelligent and corrupt.” Graham Greene, The Human Factor (1978)