How the World Bank Does Anti-Corruption Compliance 22:07, October 16, 2016

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How the World Bank Does Anti-Corruption Compliance

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The Integrity Vice President (INT), an investigative unit of the World Bank, released a report on its efforts to end corruption with business partners and within the World Bank itself. Called the Annual Update for 2016, the report is a rare look into an organization’s compliance program and provides anti-bribery and anti-corruption takeaways.

Major Types of Corruption

Corruption is the act of using “entrusted power for private gain.” It’s a blanket term that can comprise many acts, such as fraud, bribery, and collusion. Fraud was popular in procurement and bid processes where companies misrepresented their relevant experience to secure a contract. “Misrepresenting the experience of staff who are supposed to be experts in their given field can impact the quality of services delivered under a contract” a bad omen for any public-oriented project build like schools or hospitals, especially in developing countries.

Collusion, also known as antitrust, was substantiated in nine cases. One case involved two companies overpricing their bids and agreeing not to cross-bid, thus reducing fair competition. They were disqualified, to which the INT lamented “[t]his collusion, unfortunately, prevented the project from providing US$29 million of medical supplies to support disease control.” Price fixing is a common form of antitrust, can happen on all levels, and can have real world, negative implications as the report highlights. Compliance programs can use case studies and stories to educate staff and employees about the virtues of anti-corruption efforts to encourage adult learning.

Third Party Risks

Of the nine INT investigations that found corruption, six involved companies making payments to “undisclosed agents” with the expectation that these agents bribe government officials. This tracks information collected by the OECD in its 2014 Foreign Bribery Report where it found 75% of bribes were made by intermediaries like agents, third parties, or subsidiaries of companies. This activity is problematic under the Foreign Corrupt Practices Act (FCPA), which prohibits payments to foreign officials when used to improperly secure business. Companies are responsible for the actions of its agents, regardless of the company’s knowledge. Due diligence, where companies comprehensively investigate and vet third parties and agents, and constantly assessing, monitoring, and identifying corruption risks on a daily basis are critical facets of any compliance program.

Integrity and Legitimacy

The World Bank is not merely pointing fingers. It is being honest about its internal risks and what it plans to do about it. For example, it is folding INT investigation intel into operational risk management systems to “identify projects with specific integrity risks that may require additional attention.” In other words, it is proactively using data to better monitor its own activities that may lead to or indicate corruption. The World Bank has also been public about investigating 45 allegations of corruption within its own staff members, announcing that it substantiated nine members and cleared eleven. Stand-alone compliance programs are ineffective unless they can incorporate values and organizational culture. A company that communicates values and enforces policies establishes legitimacy, a critical facet of an effective compliance program.

Corruption happens everywhere and impacts everyone. That may be why the World Bank trained more than 1,100 staff, government officials and contractors in “general anti-corruption awareness, fraud and corruption risk assessments, and red flag detection.” Online compliance training can effectively teach employees how to identify and prevent corruption as well. LawRoom offers courses in anti-corruption & bribery, antitrust, FCPA, and ethics. For more information, visit us at LawRoom.com.

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Douglas Kelly
Douglas Kelly is EverFi's lead legal editor. He writes on corporate compliance and culture, analyzing new case law, legislation and regulations affecting US companies. Before joining EverFi, he litigated federal and state employment cases and wrote about legal trends. He earned his JD from Berkeley Law and BBA from Emory University.

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