WASHINGTON, February 24, 2005 – Taking another step in its anticorruption efforts, the World Bank today released its first annual report on investigations into allegations of fraud and corruption, both internally and in Bank-financed projects. The report provides detailed data for the fiscal year 2004 as well as summary data for the period 1999-2004. Since 1996, the World Bank has taken a leading role in the fight against corruption, supporting more than 600 anticorruption programs and governance initiatives developed by its member countries.
World Bank President James D. Wolfensohn said, "We are determined to root out fraud and corruption wherever they exist. I am encouraged by this report, which shows that the Bank continues to be a leader in the fight against corruption, and that we're looking into every allegation we receive related to our work and we are being fully transparent about it. Anyone who looks at the report will see that this is real action in confronting the cancer of corruption."
The report finds that in the five years since 1999, the Bank's Institutional Integrity department has investigated and closed over 2,000 cases, both internal and external. The report notes that allegations received - either through the Bank's 24-hour hotline, Bank staff, or other sources - ranged from instances of fraud and corruption in Bank-financed projects or in relation to the Bank's own administrative budget, to other forms of workplace misconduct such as sexual harassment, violations of policies and procedures, and non-compliance with personal financial obligations. Since 1999 to date, the Bank has sanctioned over 300 firms and individuals for fraud and corruption in Bank-financed projects. The number of serious allegations involving Bank staff represents less than 1% of the total staff. The report makes clear that the Bank takes all allegations seriously.
The new Annual Report on Investigations and Sanctions of Staff Misconduct and Fraud and Corruption in World Bank-Financed Projects also describes the evolution of the Bank's capacity for carrying out its anticorruption efforts, including the Institutional Integrity Department and the Sanctions Committee. Both of these were established following the World Bank's 1996 decision to confront "the cancer of corruption." A conflict resolution system for staff and protection for whistleblowers have also been established.
Wolfensohn stresses in the foreword of the report that continual vigilance is required in the anti-corruption effort: "While much has been accomplished, much more remains to be done," he said. "The diversion of funds from development projects through fraud and corruption, when it occurs, directly injures the ability of the Bank, its partners and its borrowers to achieve the goals that have been set for poverty reduction."
The Institutional Integrity department is a special independent unit created in 1999 to uncover fraud and corruption. In an indication of the Bank's commitment, the report notes that the unit's budget has been steadily increasing (to $10 million in fiscal 2004) and it has a staff of nearly 50 people - stronger force than all other multilateral development banks combined in this area.
The report cites progress in mainstreaming the investigations and sanctioning functions within the Bank, including:
- Endorsement by former U.N. Undersecretary and former U.S. Attorney General Dick Thornburgh of the Bank's new directions in the fight against fraud and corruption;
- Approval by the Bank's Board of Executive Directors of recommendations for reforming the Bank's sanctioning process to improve its efficiency and effectiveness, now in the process of implementation;
- Increases in budget and staffing for the Integrity Department;
- Improvements in case management and development of a new case management database to facilitate more effective analysis of case-related data; and
- Approval of a communications policy and changes to the Bank's disclosure policy designed to enhance the visibility and deterrent effects of the anti-corruption work.
In other developments, the Bank noted significant progress overall in clarifying policy and procedural issues for its investigative work, and in moving forward with a more proactive approach - a key element of its new strategic direction for fighting fraud and corruption in Bank-financed projects.
In addition to further use of proactive project implementation reviews, the Bank indicated its intention to institute, in the near future, a formal program to encourage firms participating in Bank-financed projects to voluntarily disclose fraud and corruption and undertake corporate reform in return for more lenient sanctions - a program similar to those in use in the United States, the European Union and Australia.
In the Bank's fiscal year ending June 30, 2004, the Sanctions Committee received 23 new cases from the Integrity Department, met 8 times and heard 16 cases, debarred 55 firms and 71 individuals, and issued 7 letters of reprimand - four to firms and three to individuals. The World Bank is the only multilateral development bank to make public its sanctions.
Nine staff members were found to have engaged in fraudulent or corrupt practices, and were terminated and barred from rehire. Three staff members found to have engaged in other forms of misconduct received other disciplinary action consistent with Bank rules and procedures.
These actions are a part of the World Bank's wide-ranging anticorruption efforts initiated in 1996.