World Bank Lauded for Publishing Sanctions Decisions
Carey L. Biron
WASHINGTON, 3 Jun
This week, for the first time, the World Bank began publishing decisions by the institution's sanctions board on cases involving fraud or corruption.
The move was heralded by several watchdog and advocacy groups as a victory for transparency.
"This is a great move by the World Bank," Eric LeCompte, the executive director of Jubilee USA Network, a group that works on issues of international debt, said on Friday. "Everyone wins with this decision."
While other international financial institutions have a sanctions process for entities found guilty of engaging in corrupt practices, the World Bank's new publications process is the most comprehensive.
Although only eight decisions were made public this week, cases will now be freely accessible on a new website.
"NGOs, businesses and governments can now better monitor patterns of fraud and corruption," LeCompte said in a statement. "Most importantly, the poor will benefit as this reporting further helps curb this behavior and ensures that resources are not stolen from the developing world."
The World Bank's sanctions board is the last court of appeal for contested cases involving corruption.
"The World Bank Group takes a hard line against corruption, and we believe that greater transparency must be part of that effort," the Bank's managing director, Sri Mulyani Indrawati, said while announcing the new plans.
"This move should deepen the deterrent effect of debarments and enhance the educational value of the Sanctions Board's findings."
Over the past decade, the Bank has named corruption as "one of the greatest obstacles to economic and social development".
"Fraud and corruption, if unchecked, can erode confidence among donors and beneficiaries, leading to skepticism about the effectiveness of international development," the Bank has stated.
The sanctions process was set up in 1999 as a way to increase accountability for firms found to have engaged in a spectrum of corrupt activities, particularly collusion, in connection with Bank- funded projects.
The board, made up of Bank officials and external legal experts, constitutes the second level of a two-tiered system set up to deal with allegations of corruption.
Since its establishment, the board has sanctioned more than 350 companies and individuals, including from the U.S. and several European countries.
Most of these actions have taken the form of debarments, the most serious of five actions the board can take, in which the parties found guilty are no longer eligible for participation in World Bank- funded projects.
Yet for a system created on the assumption that public shaming of this sort would constitute a significant deterrent to corruption, until now the Bank has only ever published the names of those companies that were being sanctioned – "a frustrating situation for many external observers hoping to track cases and patterns of fraud and corruption", according to Global Financial Integrity, a Washington-based watchdog group.
This process was made somewhat more robust in December 2011, when the Bank began to publish a legal journal, which offers explanation of the various legal precedents used in the sanctions board's decision- making processes.
The new publication schedule will now allow for full analysis of decisions by the sanctions board, as well as the evidence and legal logic used to arrive at those decisions. Many observers are suggesting that the new trove of information will be valuable for governments, NGOs, other businesses and any other entities interested in issues of corruption.
At a panel discussion here in Washington this week, the World Bank also announced two new members to the sanctions board. Catherine O'Regan is a former judge on the South African Constitutional Court and president of the International Monetary Fund Administrative Tribunal; and Yves Fortier is a former Canadian ambassador to the United Nations, who will now serve as the board's chair.
The first eight sanctions cases published involved include debarment decisions for TEAM, a U.S. consultancy; De Lorenzo of America, an Italian energy and training firm; Income Electrix, an African power utility; M/S Concept, an Indian pharmaceuticals manufacturer; Zhonghao, a Chinese construction company; ASDECON, a Thai consultancy; and Contransimex, a Nigerian engineering firm.
Most of the related decisions apply only for a limited period of time – typically a year or two – and allow for the possibility of these companies regaining their good graces under the World Bank in the future.
"We heartily welcome this move by the World Bank," Heather Lowe, director of government affairs at Global Financial Integrity, said following this week's announcement.
"Knowing which companies have been debarred is helpful, but understanding why a company has been debarred is critical in the fight against fraud and corruption. The methods used by companies and individuals, who are defrauding the World Bank, are methods used to defraud governments, businesses, and individuals globally."