[1]The World Bank Sanctions program is still relatively new. Any updated data on how companies and individuals are being investigated and sanctioned for fraud, corruption, and collusion in Bank-financed projects is welcome news to practitioners.
To that end, the World Bank’s Office of Suspension and Debarment (OSD) just released its “Report on Functions, Data and Lessons Learned 2007-2013 [2],” providing new insights into the process. A first of its kind, the report comes at the heels of other publicly available information shedding light on World Bank sanctions, like the Sanctions Board Law Digest [3], discussed by FCPAméricas here [4], here [5], and here [6], and the publication of decisions [7] in cases that have gone to appeal since 2012.
OSD performs the first level of adjudication in the World Bank sanctions process. It reviews evidence of sanctionable practice collected by the Integrity Vice Presidency (INT), finds if the evidence is sufficient to support a determination that a Respondent engaged in a sanctionable practice, issues a Notice of Sanctions Proceeding to formally commence the sanctions proceeding, and recommends a specific sanction. Respondents can choose to accept the sanction or appeal it to the Sanctions Board.
This system of adjudication is designed to help ensure an impartial review of the sufficiency of evidence. When I worked at INT, I remember OSD being exacting, demanding, and meticulous in its reviews, literally down to the punctuation mark. As an investigator, this level of scrutiny could be a source of frustration. But it was important to helping ensure justice in the process.
OSD’s new report covers the first six fiscal years of its operation. It has several key findings:
- In 95% of sanctions cases, OSD determined that there was sufficient evidence to support at least one of the claims made by INT. It rejected 5% of cases in their entirety.
- OSD referred 38% of cases back to INT based on a determination that there was insufficient evidence to support one or more of the accusations made.
- OSD found insufficient evidence on all claims related to 13% of Respondents included in cases (some cases involve multiple Respondents, which accounts for apparent discrepancies in the numbers above).
- On average, OSD takes 60 days to make an evidentiary determination in a case.
- OSD renders a new determination, on average, once every ten days.
- In 40% of cases, Respondents appeal the case to the Sanctions Board.
- Settlements account for a considerable percentage of cases – almost 30% in FY 2011, 22% in FY 2012, and 23% in FY 2013.
- While INT investigations require significant time to complete, they have steadily grown shorter. In FY 2008 and 2009, they commonly lasted up to three years, or longer. In FY 2011 and 2012, it was more common to see investigations completed in less than two years.
- 86% of cases and settlements received by OSD are based on fraud, 14% on corruption, and 9% on collusion (some cases include more than one type of sanctionable practice).
- When considering the types of fraud at issue in sanctions cases, there are about the same amount of cases involving forged third party documents, like bank guarantees, manufacturer’s certificates, and performance or experience documentation (105 cases), as there are of other forms of fraud, like false invoices or payment certifications, misrepresentation or omission regarding a conflict or an agent, or misrepresentation regarding past performance (99 cases).
In its report, OSD provides “lessons learned” for setting up suspension and debarment systems. This might be intended to provide guidance to other multilateral development banks that have less mature sanctions programs. National governments could also use these recommendations in managing their own administrative proceedings. Lessons include securing sufficient budgets, setting up administrative and case management systems, keeping a detailed chronological file of every case down to each phone call and meeting, and creating mechanisms for obtaining interpretations on legal and procedural matters.
For companies and individuals working to manage risks of corruption, collusion, and fraud related to Bank-financed projects, or for those defending themselves in current investigations, this data is helpful to gaining a better understanding of recent enforcement trends and the context of proceedings. The fact that World Bank investigators are forced to make their case to an independent body, after they have collected evidence for literally years, is an important consideration for all participants in the process.
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