September 17, 2006 — In a significant milestone in the battle for improved governance, the heads of the world's major multilateral development banks agreed on Sunday to a common framework for fighting fraud and corruption in activities and operations funded by their institutions.
Meeting in Singapore, venue of the World Bank and International Monetary Fund Annual Meetings, the chiefs of the African Development Bank Group, Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank Group, Inter-American Development Bank Group, International Monetary Fund and World Bank Group outlined the following joint actions to combat fraud and corruption:
- Agreement in principle on standardized definitions of fraudulent and corrupt practices for investigating such practices in activities financed by the member institutions;
- Agreement on common principles and guidelines for investigations;
- Agreement to strengthen the exchange of information, as appropriate and with due attention to confidentiality, in connection with investigations into fraudulent and corrupt practices;
- Agreement on general integrity due diligence principles relating to private sector lending and investment decisions;
- Agreement to explore further how compliance and enforcement actions taken by one institution can be supported by the others.
In a joint statement, the leaders said, "Our institutions will continue to work together to assist (our) member countries in strengthening governance and combating corruption in cooperation with civil society, the private sector and other stakeholders such as the media and judiciary."
"A unified and coordinated approach is critical to the success of the shared effort to fight corruption and to prevent it from undermining the effectiveness of our work," said World Bank President Paul Wolfowitz.
John Githongo, the noted Kenyan anti-corruption crusader, described the agreement as "an impressive initiative." Huguette Labelle, chair of Transparency International, told reporters it was "a good step…anti-corruption measures can only work if there is no weak link in the chain."
Sunday's decisions are based on the recommendations of the Joint International Financial Institution Anti-Corruption Task Force, which the banks had set up in February to develop a consistent and harmonized approach. The agreement on the definitions is for now in principle until the new definitions are ratified by the boards of all the banks. The Board of the World Bank has already approved them, as have the boards of the AfDB and IDB.
The new definitions will ensure that the Bank can sanction acts such as fraud and corruption if found to have been committed by an implementing agency or fiduciary intermediary that, although the recipient of Bank funds, has not been selected under its Procurement Guidelines. Previously, the Bank's definitions of fraud and corruption were narrowly tied to procurement processes or execution of contracts under the Procurement Guidelines.
Suzanne Folsom, Director of the Bank's Institutional Integrity Department, said, "The development of a common set of definitions of fraud, corruption, collusion and coercion across our institutions will send a strong deterrent message. With all the banks taking a strong, symmetrical and coordinated approach, we can also show partner governments and private sector firms that we are each maintaining the same high standards." Folsom was appointed by President Wolfowitz to represent the World Bank on the joint IFI Task Force.
Having harmonized definitions, the multilateral banks felt that investigation procedures should also be aligned. The new guidelines build on the Conference of International Investigators' "Uniform Guidelines for Investigations," which are widely endorsed in the international community.
Many of the institutions had been sharing information on an informal basis; today's agreement formalizes the arrangement. It ensures that the confidentiality of information is maintained to protect whistleblowers and others.
The new common framework is reflected in the Bank's draft strategy paper on governance and anti-corruption, which is to be discussed at the Development Committee on Monday.
The paper says that, at the global level, the Bank Group will promote coordinated action and harmonize governance and anticorruption initiatives with the IMF, regional development banks and other donors, including making investigative rules and procedures more consistent, strengthening information and establishing mechanisms to recognize each other's sanctions decisions.