MANILA, Philippines - Leading multilateral development banks (MDBs) have signed an agreement to cross debar firms and individuals found to have engaged in wrongdoings in MDB-financed development projects.
The new accord was formulated by the African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank Group and the World Bank Group.
Sanctions include reprimand, conditions on future contracting, or debarment - declaring a company or individual ineligible to participate in any future activities it finances, either for a period of time or permanently. Public debarment, which carries with it both financial and reputational risks, is considered a major deterrent to wrongdoing. Under the new agreement, entities debarred by one MDB may be sanctioned for the same misconduct by other participating development banks.
World Bank president Robert B. Zoellick said the cross debarment agreement sends a clear message against corruption: steal and cheat from one, get punished by all.
“This action gives all our banks a strong new tool to hold accountable firms that are engaging in fraudulent and corrupt practices in development projects, as well as a powerful incentive to companies to clean up their operations. The rules of the road have gotten tougher. This accord also underscores to our member governments that scarce development financing goes where it is intended,” he added.
“The MDBs unified action, which includes greater information sharing and coordinated investigations, is critical to the success of our shared effort to fight corruption and to prevent it from undermining development effectiveness,” Zoellick said.
MDBs participating in the agreement will continue to manage their independent strategies to deter and prevent fraud and corruption in projects. However, the new agreement offers an opportunity to deepen the cooperation between participating MDBs on fraud and corruption risk management.
“This enhanced cooperation among the MDBs is taking the fight against fraud and corruption to a new level. Dealing resolutely with corruption is key to the development of sustainable economies that will attract investment and engender confidence. This is a very important step,” Thomas Mirow, president of the European Bank for Reconstruction and Development, said in a statement.
Stepping up deterrent action is critical to the success of global efforts to fight corruption and to prevent it from undermining development effectiveness.
“Fighting corruption will maximize the development effectiveness of our collective efforts to alleviate poverty and ensure sustainable economic growth,” the Asian Development Bank said.
This collective enforcement action validates the institutions’ commitment as part of the International Financial Institutions Anti-Corruption Task Force.
The accord committed MDBs to further explore how compliance and enforcement actions taken by one institution could be mutually recognized. The institutions agreed to harmonize their definitions of practices that should be sanctioned, and to share greater investigative information among the banks. Cross debarment combined with greater information sharing and coordinated investigations, should allow the institutions to more robustly prevent, detect, and deter corruption. A strong, symmetrical, and coordinated approach can also show partner governments and private sector firms that each institution is maintaining the same high standards.
Early last year, the World Bank debarred seven firms and one individual for engaging in collusive practices under a major bank-financed roads project in the Philippines. Two of the debarments are permanent.
The debarments was a result from an in-depth inquiry conducted by the World Bank’s Integrity Vice Presidency (INT). INT is responsible for investigating allegations of fraud and corruption in bank-financed operations.