1. The World Bank Department of Institutional Integrity 1 Business Integrity and Anticorruption Initiatives of the World Bank Department of Institutional Integrity Maarten de Jong, Director June 2005

2. The World Bank Department of Institutional Integrity 2 “All of us – lenders, borrowers, contractors and civil society – have to make a strong commitment against corruption, the number one challenge in reducing poverty now.” James D. Wolfensohn (April 21, 2004)

3. The World Bank Department of Institutional Integrity 3 “Corruption is a terrible disease that eats away at development successes. INT’s work is part of the core business of the World Bank.” Paul D. Wolfowitz (June 9, 2005)

4. The World Bank Department of Institutional Integrity 4 Issues to Discuss Together l The anti-corruption imperative l World Bank’s anti-corruption strategy l Dept of Institutional Integrity update l Recent World Bank policy changes l Voluntary Disclosure Program l Issues of mutual interest

5. The World Bank Department of Institutional Integrity 5 Context: The Anti-Corruption Imperative l Growing pressure from donors to enhance aid effectiveness l Similar pressure from civil society to improve accountability l Anti-corruption conventions at national, regional, and global levels making bribe payments illegal

6. The World Bank Department of Institutional Integrity 6 Changing Business Environment l More firms (but not all) want a level playing field and an end to the need for illegal payments l Increasing competitive international business environment – bribes raise costs, cut profits l Tension between international and local firms l More chances of getting caught l Reputational risk greater than ever

7. The World Bank Department of Institutional Integrity 7 World Bank’s Anti-corruption Strategy l Prevent fraud and corruption in World Bank- financed projects l Help countries that request the Bank’s support in their efforts to reduce corruption l Mainstream anti-corruption in all aspects of the Bank’s relations with its borrowing member countries l Support international efforts to reduce corruption

8. The World Bank Department of Institutional Integrity 8 Prevent and deter fraud and corruption Outreach/educate Bank staff and clients Investigate allegations of fraud, corruption, and misconduct Feed lessons learned “upstream” into lending Leverage results through collaboration Confront bribe-payers through sanctions process. Department of Institutional Integrity In compliance with World Bank rules, ensuring all due process safeguards, INT’s mission is to:

9. The World Bank Department of Institutional Integrity 9 Hotline, Website, etc. Preliminary Inquiry Prioritization Full Investigation Sanctions Cttee/Debarment List Misprocurement Declared Internal Disciplinary Proceeding Referral for Prosecution or Relevant Action Support to Country Teams Lessons Learned Publicize Results Capacity of Clients Receipt of Allegation Investigate Deterrence Prevention What Does INT Do? The World Bank’s Department of Institutional Integrity (INT) was created in March 2001. Its core functions are to:  Investigate allegations of fraud and corruption in World Bank Group projects,  Investigate allegations of misconduct by Bank staff, and  Train and educate staff and clients in detecting and reporting fraud and corruption in World Bank Group projects. The World Bank’s Department of Institutional Integrity (INT) was created in March 2001. Its core functions are to:  Investigate allegations of fraud and corruption in World Bank Group projects,  Investigate allegations of misconduct by Bank staff, and  Train and educate staff and clients in detecting and reporting fraud and corruption in World Bank Group projects.

10. The World Bank Department of Institutional Integrity 10 Investigative Capacity l $10 million budget l Staff has grown from 20 to over 50 in 3 years l International, multi-lingual staff l Investigators, forensic accountants, lawyers l Able to travel and do on-site interviews l Interactive database

11. The World Bank Department of Institutional Integrity 11 More Information About Business l More knowledge about companies, individuals, and money flows than ever l INT database l World Bank databases l Worldwide web l Working relationships with other MDBs and investigative bodies

12. The World Bank Department of Institutional Integrity 12 Reactive Approach l Traditional response to allegations and fraud and corruption –Staff Reports –Contractor complaints –Results of Sanctions –Hotline/e-mail—sometimes anonymous

13. The World Bank Department of Institutional Integrity 13 Proactive/Preventive Approach l INT data review –Case data/results l Detailed Implementation Review (DIR) –Documentation examination –Forensic Accounting

14. The World Bank Department of Institutional Integrity 14 End Results CONTRACTOR Criminal Referral Permanent Debarment Temporary Debarment ReprimandOther Imposition of Sanction Hearing Before the Sanctions Committee Notice of DebarmentMisprocurement Finding of Fraud or Corruption Public Announcement

15. The World Bank Department of Institutional Integrity 15 End Results BORROWER STAFF Referral to a Member Government MisprocurementSuspension of Loan &/or Portfolio Request removal Finding of Fraud or Corruption

16. The World Bank Department of Institutional Integrity 16 Results So Far In six years: Over 200 substantiated cases Over 300 firms and individuals sanctioned 25 criminal convictions obtained in multiple jurisdictions (U.S., Sweden, Guinea, Bolivia, etc) Many more cases in the pipeline Result: Better understanding of how corruption works in development projects But more to be done

17. The World Bank Department of Institutional Integrity 17 World Bank Policy Changes l World Bank Board of Directors approved significant sanctions reforms in July 2004 l Bank now implementing these changes l Thornburgh Reports available on web

18. The World Bank Department of Institutional Integrity 18 Sanctions Policy Changes Recognition of cooperation as a mitigating factor Incentives to disclose information Temporary suspensions of firms during sanctions proceedings Development of a wider range of sanctions New Sanctions Board -- outside majority Expanded disclosure of investigations and sanctions

19. The World Bank Department of Institutional Integrity 19 Proposed Voluntary Disclosure Program l Encourage firms that have engaged in fraudulent or corrupt practices in Bank-financed operations to disclose the details of those activities l In return for reduction in sanctions and confidentiality of identity l Not an amnesty, immunity, or pardon program l Not a plea bargain program l Pilot program underway over past year l Formal launch anticipated soon

20. The World Bank Department of Institutional Integrity 20 Proposed Voluntary Disclosure Program l Results from firms’ self-monitoring l Not triggered by an investigation l For firms committed to stopping corrupt practices l Supplements existing sanctions process l Aggregate information supplied to governments for own action l Faster, less expensive resolutions

21. The World Bank Department of Institutional Integrity 21 Enhanced Communications for Deterrence and Compliance l World Bank Board also approved disclosure policy for sanctions and investigations l Stepping up our efforts to publicize final results of investigations worldwide l Sanctions, press releases, reports and other information available on worldwide web l First INT annual report for FY04

22. The World Bank Department of Institutional Integrity 22 Upstream Rule Changes l Tightening procurement rules for tendering as well as implementation and execution l Also pursuing standardization via closer cooperation with other MDB’s via harmonization process

23. The World Bank Department of Institutional Integrity 23 New Integrity clause l Standard bid documents for large civil works, Sec II, para 9: “We hereby certify that we have taken steps to ensure that no person acting for us or on our behalf will engage in bribery.” In cooperation with Transparency International

24. The World Bank Department of Institutional Integrity 24 Revised Procurement Guidelines l Based on INT’s input from casework in Bosnia, Albania, Columbia, etc. l New definitions of “fraudulent practice,” “corrupt practice,” and of “public officials” to include MDB staff; l Prohibitions on “collusive and coercive practices”

25. The World Bank Department of Institutional Integrity 25 Broader Definitions l Dialogue between MDBs about developing common definitions of fraud and corruption l NGOs and contractors both criticize lack of common definitions l Ensure that each organization treats the same conduct as acceptable -- and the same misconduct as sanctionable l Cover all funding, not just procurement

26. The World Bank Department of Institutional Integrity 26 Issues of Mutual Interest l Increasing compliance l Assessing impact of investigations and sanctions for upstream policy changes l Raising awareness for prevention l Raising standards l Incentives for business integrity programs l Working together for level playing field

27. The World Bank Department of Institutional Integrity 27 Websites l www.worldbank.org/integrity www.worldbank.org/integrity l www.worldbank.org/anticorruption www.worldbank.org/anticorruption l www.worldbank.org/procurement www.worldbank.org/procurement