Corruption Hunters Rally for Action Against Fraud

December 6, 2010—Corruption fighters from around the globe are gathering December 6 to 8 at the World Bank in Washington, DC, to up the ante on fraud in development projects – part of an effort to halt practices that cause $20-40 billion to be stolen each year from developing countries.

In the first meeting of its kind, more than 200 members of the International Corruption Hunters Alliance from 134 countries aim to create an international enforcement regime to track and resolve bribery and fraud cases that reach beyond borders to affect more than one country.

Major goals include increasing the number of corruption cases prosecuted in both developing and wealthy countries, and resolving cases so that settlements – and liability findings – are comprehensive and multijurisdictional.

The meeting, supported by the governments of Australia, Norway and Denmark and convened by the World Bank, will also discuss best practices for sharing information and monitoring enforcement.

It takes place as the World Bank increases its own efforts to root out corruption – seen as one of the greatest obstacles to economic and social development in low-income countries.

In the last two years, the Bank has increased its debarments five-fold and has become a primary backer of the Stolen Asset Recovery (StAR) initiative to repatriate stolen funds to developing countries.

“When people steal, defraud or corrupt public money, they must be investigated and prosecuted,” said World Bank Group President Robert Zoellick.

“Together with the alliance, we aim to sharpen foresight, to better anticipate fraud and corruption risks in the decade, particularly in the challenging contexts where the World Bank operates.”

Firms Banned Under Cross-Debarment Agreement

The Corruption Hunters meeting comes on the heels of the World Bank’s announcement last week debarring 14 firms from doing business in projects it finances: two that had been working on World Bank-financed projects in Africa and Albania, and 12 that had previously been debarred by the Asian Development Bank, one of the partners in the Cross-Debarment agreement signed last April.

The decision marked the first time the World Bank cross-debarred firms  that have engaged in fraud related to another multilateral development bank’s projects under the new global enforcement agreement . Under the agreement, the World Bank and other multilateral development banks have agreed to enhance information-sharing, harmonize sanctionable practices and step up enforcement action to ensure development resources do not end in the wrong pockets and are used for their intended purposes.

The World Bank, recently ranked as the most transparent donor among 30 major donors by a coalition of civil society organizations, has debarred 58 firms in the last two years, compared with 9 the previous two years. Debarments have included high-profile cases involving the UK publisher Macmillan Ltd a Russian subsidiary of Siemens AG. Siemens agreed to pay $100 million for anti-corruption initiatives worldwide as part of a settlement (pdf).

Seeking Better Enforcement

At the meeting this week, anticorruption officials from six regions will join authorities from countries that have prosecuted bribe payers, private sector representatives, and members of international organizations such as the United Nations, Interpol, Organization for Economic Cooperation and Development (OECD), andTransparency International to set priorities and define the next level of anti-corruption action.

The alliance was established by the World Bank in 2009 to channel the Bank’s referrals for bribery and corruption cases to affected countries.  In the last fiscal year, the World Bank referred 32 cases to governments and anticorruption agencies so they could investigate whether national laws had been violated. The list of countries was made public in the 2010 Integrity Annual Report (pdf).

However, getting national authorities to enforce and follow up on transnational cases has been a challenge for a variety of reasons, including lack of political commitment, legal tools, or material resources. Gathering evidence may be difficult because witnesses may be fearful of retaliatory actions or even threats to their safety, World Bank Integrity Unit staff said in a recent Speak Out on the World Bank website.

In addition, of 38 countries that have ratified an OECD convention on bribery, only seven actively enforced the convention as of the end of 2009, according to Transparency International.

Likewise, the Stolen Asset Recovery Initiative to recover funds lost through corruption from safe havens around the world, has been challenged to increase the number of cases, World Bank Managing Director Sri Mulyani said at the 14th International Anti-Corruption Conference in Thailand last month.

“This requires more action on the part of national authorities in developing countries and financial centers, to identify, investigate and prosecute corruption cases.”

‘Corruption Can Kill’

The stakes are high. Not only is corruption a barrier to development, innovation and business growth, but it can be deadly, Mulyani said.

“…Sometimes the corruption is in the form of counterfeit drugs, so people don’t get better, or they die. Sometimes corruption is a building that collapses in the face of a natural disaster, because the quality inspector took a payment from the construction contractor to falsify an inspection. Corruption can kill.”