Introduction
Corruption—the abuse of public office for private gain—covers a wide range of behavior, from bribery to theft of public funds. Corruption exists all over the world, but it is usually present in countries with weak institutions, often affected by fragility and conflict. For over 20 years, the World Bank has been working at the country, regional, and global levels to help countries build capable, transparent and accountable institutions to deter corruption. We also work with governments to design and implement programs and we work with global partners to reduce illicit financial flows.
The recent World Bank working paper, ‘Elite Capture of Foreign Aid,’ suggests a correlation between aid disbursements to highly aid dependent countries and bank deposits in certain offshore financial centers. The paper is explicitly a work-in-progress and, as the authors agree, does not demonstrate causality. However, it serves as a reminder of the fiduciary and corruption risks for aid providers, as well as businesses and private investors, operating in the world’s poorest and most challenging countries. It also speaks to the importance and urgency of addressing issues around offshore financial centers and increasing transparency in the financial sector.
We will continue to research corruption to understand it more fully and with the goal of further enhancing our tools of prevention and detection. In the meantime, we will continue to implement our anticorruption agenda and fiduciary work around the world.
Fighting Corruption in World Bank (IDA/IBRD) Financed Projects
The World Bank has robust controls in place to ensure that the funds disbursed to client countries are used for their intended purposes.
- The World Bank is known for its high fiduciary standards (including financial management and procurement as well as the investigations and sanctions by our integrity unit). These standards include the due diligence that our experts/professionals undertake as part of project preparation and during implementation. Financial Management and Procurement Specialists are assigned to every Bank-assisted project throughout preparation and implementation.
- These due diligence activities are complemented with our various interventions to help countries build capable, transparent, and accountable institutions and design and implement successful anticorruption programs.
- The World Bank’s Integrity Vice Presidency is an independent unit that investigates allegations of fraud in Bank-Group financed operations; our Sanctions Board and Office of Suspension and Debarment impose sanctions for substantiated allegations stemming from these investigations.
- 956 firms and individuals were debarred between 1999 and 2019, and 421 Multilateral Development Bank cross-debarments have been enforced by the World Bank in that same period.
Helping Governments Deter and Detect Corruption
We have a set of instruments and initiatives to fight systemic corruption.
- The World Bank helps governments improve public financial management, improve judicial services, train and increase capacity of the civil service bureaucracy, invest in financial information systems, expand access to information for the public, and reduce opportunities for administrative corruption such as bribery.
- The World Bank is continually working on assisting clients to take advantage of advances in technology (AI, Big Data and Machine Learning Applications) to address corruption risks and other fiduciary concerns, which are also playing a transformative role in fostering greater trust and accountability.
Illicit Financial Flows (IFFs)—the movement of funds that are either the proceeds of crime or illegally moved or diverted—divert resources from social needs and contribute to poverty and inequality. We are working with governments to help them build capacity in critical areas for reducing IFFs.
- This work includes support for anticorruption efforts and improved auditing as well as assistance on policies relating to public financial management, tax evasion, public procurement, trade facilitation and border crossing, natural resource management, and economic regulation.
- We are currently developing new tools to monitor and measure IFFs at the country and regional levels.
- We are continuing our work to help countries identify and respond to risks related to money laundering. Our national risk assessment tool focuses on all offenses that generate illegal proceeds, including corruption, tax evasion, organized crime, and environmental crime and helps countries understand the extent of their exposure to many of the activities that give rise to IFFs.
- We are working to improve access to information on beneficial owners for public authorities -to prevent the creation of shell companies- and strengthen the exchange of tax information. We are also helping governments build systems for asset disclosure by public officials and to protect against money laundering. These efforts to build transparency and accountability also aim to ensure that clean public officials and business are recognized, while corrupt and criminal ones are sanctioned.
The Stolen Asset Recovery Program (StAR), our partnership with the UN, has actively assisted in the freezing or recovery of well over $1 billion dollars in stolen funds.
- In December 2017, StAR organized the First Global Forum on Asset Recovery (GFAR) convened by the US and the UK focusing on Nigeria, Sri Lanka, Tunisia, and Ukraine. A memorandum of understanding between Nigeria, Switzerland and the World Bank was signed, which set out the return of $321 million of recovered assets.
- StAR is currently supporting the establishment of asset recovery and management offices in Uganda, Tanzania, Moldova, and Ukraine.
Looking Forward
Given the evolution of global financial flows and emergence of new technologies and systems—both for moving money and increasing the transparency of those movements—we are reassessing our approach to corruption. We have been working on a new World Bank Anticorruption initiative, including an Action Plan for implementing a more intensive approach to tackling corruption in client countries, including ways to address the role that banks, trusts and company service providers have in handling the proceeds of corruption.
Examples of Bank’s Country Work
- In Zambia, we are implementing a multi-institutional, multi-purpose and multi-stakeholder digital platform for monitoring the country’s mineral value chain from exploration to export. The platform is also helping to improve the quality and availability of administrative registers that can be used in production of official statistics pertaining to the mining sector.
- In Madagascar, we supported reforms through implementation of performance contracts at the country’s main port, Toamasina, starting in 2016. This responded to a decade of customs malpractice, which had led to major shortfalls in revenue. Performance contracts incentivized customs inspectors to prevent tariff evasion, using information technology to monitor inspectors’ performances. The initiative is ongoing, but data shows that fraud detection has increased substantially.
- In Madagascar, we are also using machine-learning to support the creation of a unique tax number and providing a unique identifier (digital ID) for the country.
- In Uganda, the government launched the “know-your-budget” portal which makes information on public funds accessible and provides citizens with an anonymous whistleblowing tool. The initiative aims to increase government transparency.
Historic Bank Timeline on Corruption:
- 1996 Combatting the Cancer of Corruption: In his Annual Meetings speech, WBG President James Wolfensohn offered Bank assistance to governments who would implement national programs to discourage corrupt practices, emphasizing the need to “deal with the cancer of corruption” - the first such statement by a WBG president.
- 2001 Institutional Integrity (INT) Department created. INT’s role is to investigate allegations of fraud and corruption in World Bank Group-financed operations and pursue sanctions when wrongdoing is found.
- 2007 Stolen Asset Recovery (StAR) Initiative: A partnership between the UN Office on Drugs and Crime and the WBG, StAR works with developing countries and financial centers to prevent the laundering of the proceeds of corruption and to facilitate more systematic and timely return of stolen assets. StAR has actively assisted in the freezing or recovery of well over $1 billion dollars in stolen funds.
- 2010 INT Cross-Debarment: To ensure that if you steal from one IFI you get punished by all, five multilateral development banks (MDBs) agreed that entities debarred by one MDB will be sanctioned for the same conduct by the others. In FY18, the WBG honored 73 cross-debarments from other MDBs.
- 2010 Open Data: The initiative provides free and open access to data that had previously been restricted to commercial use and was only available to paying users. Bank data use has seen a 10-fold increase, accessed by over 30 million people per year.
- 2014 Citizen Engagement: The World Bank has taken steps to institutionalize citizen engagement across all our programs because it can improve the delivery and quality of public services; enhance the management of public finances; and bring greater transparency, accountability, and social inclusion.
- [Ongoing] Gov Tech: Makes government operations and services simple, transparent and efficient, powered by technology. Incorporating big data, AI, blockchain into systems for carrying out core government operations (such as Public Financial Management, procurement, monitoring and evaluation, and taxation) can detect patterns of corruption and help prevention. Also, digitally enabling public service delivery to citizens and businesses can minimize human interactions and consequently the opportunity to ask for and receive bribes.