U.S. Sen. Dick Lugar announced today that criminal prosecution of firms and individuals caught defrauding the World Bank and the other multilateral development banks is an important deterrent, but use of this tool varies widely among the banks.
Lugar, the ranking member of the Senate Foreign Relations Committee, has led a long-term oversight project of the banks’ anti-corruption efforts. He recently asked the presidents of all the banks to describe their policies and practices regarding criminal prosecutions of those who have been caught defrauding the banks, accepting or giving bribes and kickbacks, or misappropriating funds. “A criminal prosecution sends a strong message that the banks do not tolerate corruption, and has an important deterrent effect,” Lugar said.
A review of the responses from the banks—the World Bank, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank—found that while all have stepped up their efforts to ban corrupt firms and individuals from future bank business, there was significant variation in how often the banks referred cases to national authorities for criminal prosecution. The World Bank, for instance, has referred 70 cases over the past five years, while the much smaller African Development Bank has made one criminal referral during that time. The banks, as international institutions, cannot bring criminal charges themselves.
Many of the banks expressed the view that because standards of evidence are much higher for criminal prosecution than for administrative debarment, referrals are often not possible. All the banks’ responses are attached. “I urge the banks to work together to find ways to make greater use of prosecutions where appropriate,” Lugar said. “Vigor and consistency across the banks will enhance all their efforts in fighting the scourge of corruption.”
Lugar published the banks responses today to correspond with a two day meeting of the International Corruption Hunters Alliance at the World Bank. Lugar’s inquiry is part of his on-going effort to improve the anti-corruption efforts of the banks to make sure that donor funds reach the world’s poor instead of being lost to graft. Earlier this year, Lugar noted, the banks took an important step forward by agreeing that each bank would ban from future business any firm or individual that had been debarred by another bank. Lugar called for this “cross-debarment” in legislation that was enacted in 2005.
Lugar said he was pleased that a number of the banks have increased their debarment activity in recent years. The World Bank, for instance, has debarred such major firms as a Russian subsidiary of Germany’s Siemens and British-based publisher Macmillan.