World Bank's Preventive Work Raises Cost of Being Corrupt

August 29, 2011

WASHINGTON, August 29, 2011 — The World Bank's Integrity Vice Presidency (INT) today announced that recently enhanced efforts to prevent and deter fraud and corruption are achieving results, including protecting high-risk Bank-financed projects, stopping tainted contracts from being awarded and bolstering anti-corruption capacity in countries where it operates.

"We presently focus on high-risk projects and sectors based on information arising from complaints, our own due diligence and other law enforcement agencies.  We do this to protect World Bank funds, deter wrongdoers and make development work better," said the World Bank's Vice President for Integrity, Leonard McCarthy.

In a follow-up to the recommendations of a 2007 Independent Review Panel, headed by former Federal Reserve Chairman Paul Volcker, the World Bank established the Preventive Services Unit (PSU) in INT, which was designed to develop "protections" against corruption, assist with education and training, and offer advice and tailored responses to allegations of corruption that INT does not investigate.  Over the past year, the unit has worked with corruption investigators in INT and project teams across the Bank to produce the following results:

  • Built precautions into high-risk projects valued at approximately $14.1 billion.  Over the last year, the PSU helped build precautions against fraud and corruption into 48 projects spanning 29 countries, covering large loan commitments.  The preventive measures include technical audits to avoid substandard quality; strengthened warranties and representations in key contracts; screening of projects for the most common red flags of fraud and corruption; and promotion of hotline numbers for use by citizens to file complaints.
  • Stopped tainted contracts.  Early preventive action has already enabled the World Bank to stop tainted contracts before they are awarded.  In one case, the consulting company suspected of falsifying its credentials retracted its bid valued at $4.4 million.  In another case, serious issues identified by INT led government officials to reject the award of a $5 million contract, while in other instances bidders lost their prequalification status.  The World Bank also developed a Company Risk Profile Database (CRPD) that contains the names of companies currently under investigation.  This registry was searched 7,275 times in the past year as part of the project due diligence undertaken by Bank staff.
  • Developed preventive and forensic training for 2,707 government officials and Bank staff.  Last year, INT oversaw the training of 2,707 officials and Bank staff in what can go wrong in projects, how to conduct forensic audits, and what red flags to look for in procurement, accounting and asset management.  The training took place in diverse contexts including Bangladesh, Georgia, India, Indonesia, Lebanon, Kenya, Kosovo, Lao PDR, Pakistan, the Philippines and Thailand.  The training was tailored to help government officials identify suspicious transactions and enable civil society to hold executing agencies accountable for fair and transparent procurement.  In one case, it made it possible for government auditors to uncover more than $40 million in ineligible expenditures.

"The financial crisis is driving the pressure on governments to increase their anticorruption efforts and stop leakages.  The World Bank supports these efforts by including prevention as a core element in all lending and providing advisory support for government reforms," said the World Bank’s Vice President for Europe and Central Asia, Philippe H. Le Houerou.

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