FRAUD INVESTIGATIONS BY MULTILATERAL DEVELOPMENT BANKS

RC: Could you provide a brief overview of multilateral development bank (MDB)-financing? What trends and developments have you seen in recent years?

Marler: The MDBs, namely, the World Bank, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development and the Inter-American Development Bank, provide billions of dollars each year in loans and donor funding to less-developed countries. International development companies worldwide, which provide numerous and diverse services, are able to compete for and bid on MDB-funded projects. Once the contract is awarded, the winning bidder is responsible for fulfilling the obligations under the MDB financed contract, which can range from IT systems in hospitals to agriculture projects and online tax systems for a developing country’s revenue department. But with this funding comes responsibility, and the MDB community is increasingly seeking to use its influence in the global anti-corruption fight. As such, companies that benefit from MDB funding effectively submit to their investigative jurisdiction and their ability to sanction for misconduct, such as corruption, fraud, collusion and coercion.

RC: To what extent have MDBs developed as major players in the international anti-corruption landscape? How has their role changed over the past 20 years?

Marler: Over the past 20 years, the MDBs have become major players on the international anti-corruption landscape. The power of debarment that these banks wield over contracting parties is such that they must be thought of as distinct jurisdictions in and of themselves. Indeed, the MDBs now run substantial and sophisticated anti-corruption departments that are charged with the responsibility for investigating and punishing allegations of corruption, fraud, coercion and collusion – the sanctionable practices – on bank-financed contracts. Yet these investigative departments – such as the Integrity Vice-Presidency of the World Bank – should not be viewed in isolation, for not only do they interact with each other, they also engage with the law enforcement agencies of their member states and regularly make criminal referrals in respect of matters that they have investigated. Indeed, this is a trend that can be seen with the African Development Bank, which, like the World Bank, now has an established and effective Integrity and Anti-Corruption Department (IACD) that works closely with such agencies as the United States’ SEC.

Jul-Sep 2014 Issue

Bretton Woods Law