In early October 1996, in front of a packed audience at the International Monetary Fund’s Headquarters in Washington, D.C., then-president of the World Bank James Wolfensohn delivered what is now referred to as his “Cancer of Corruption” speech. What made Wolfensohn’s talk significant was his rejection of the longstanding belief that corruption was a political problem—and therefore outside the boundaries of the World Bank. If corruption inhibited economic growth, as Wolfensohn and others knew it did, then the Bank could take affirmative steps to prevent it. It was after those remarks that the Bank created the early structure of a formal sanctions regime to bar companies and individuals from engaging in fraud and corruption in Bank-financed projects.
Since then, the World Bank’s sanctions process has evolved into an increasingly sophisticated juridical body to become one of the key components of the Bank’s governance and anticorruption strategy. Today, hundreds of individuals and companies, including large multinationals, have been sanctioned under the program.
The maturation of the Bank’s sanctions process has been driven by periodic reviews and reforms, initiated by the Bank itself, to reflect changing standards of good governance and administration. As part of the end of “Phase I” of a larger review that began in the spring of 2007, the Bank is now hosting a series of multi-stakeholder meetings to gauge public reaction to proposed reforms. To “try to take the temperature of what’s been working well and what’s been working less well,” in the words of Frank Fariello, who is lead counsel of operations policy in the World Bank’s Legal Vice Presidency.
While the compliance community awaits greater insight into the Bank’s proposals before it can give meaningful comments on the merits of the proposals, here are four suggestions for the World Bank on possible improvements to its sanctions system:
1. Introduce a World Bank Whistleblowing Program
Most World Bank sanctions cases originate from the Bank’s procurement system. It is probably the case that corruption in procurement is more regularly exposed because those who lose bids are motivated to report when they suspect a competitor won because they paid a bribe. The fact that cases do not arise as frequently out of the Bank’s other activities should not, however, be taken as a sign that those areas experience any less corruption or fraud. One way to more aggressively probe corruption in those areas is to create a safe environment for whistleblowers. Whistleblower protections, including free legal counsel, prohibitions against retaliations, anonymity, etc., have a significant impact on the number of individuals willing to come forward with credible information. Of course, how the Bank balances whistleblower protections with the need for due process in challenging jurisdictions and across different legal systems will present unique challenges.
