Corruption is a huge obstacle to reducing poverty, and the burden of corruption falls disproportionately on the world’s poorest people.

There is a tendency to focus on corruption in developing countries as “their problem,” but in every bribe there are two players: the taker and the giver. Any company acting corruptly in a development project—regardless of its headquarters location, big pockets or political clout—is responsible for perpetuating corrupt environments and continuing the cycle of extreme poverty.

To reduce the corrosive impact of corruption in a sustainable way, it is important to go beyond the symptoms of the problem and to tackle the causes. An effective anti-corruption strategy increases political accountability, creates a competitive private sector, strengthens civil society, and improves public sector management.

As more companies learn that acknowledging corruption in their ranks can save money and agony, the tools available for coming clean have expanded. Businesses working with the World Bank can become part of the solution by implementing robust compliance programs, entering into the Voluntary Disclosure Program (VDP), and cooperating with World Bank investigations.

The Easy Way

In 2006, the World Bank Department of Institutional Integrity, which investigates allegations of fraud and corruption in its projects, launched the Voluntary Disclosure Program as an option for firms, NGOs, or individual contractors that have committed wrongdoing in World Bank projects. The participants commit to: 1) not engage in misconduct in the future; 2) disclose to the World Bank the results of an internal investigation into past fraudulent, corrupt, collusive, or coercive acts in World Bank-financed projects or contracts; and 3) implement a robust internal compliance program that is monitored by a World Bank-approved compliance monitor.

In exchange for their full cooperation, participants avoid debarment for disclosed past misconduct, keep their identities confidential and are allowed to continue to compete for Bank-supported projects.

There are similar programs in the European Union, Brazil, Japan, Pakistan, the United States and other countries. “We consulted with a wide range of businesses during the VDP’s development,” said Robert Delonis who now manages the program. “We wanted to ensure that the program had realistic incentives and made participation as straightforward as possible.”

The program reveals past behavior by requiring participants to internally investigate contracts over the previous five years that it believes to be tainted by fraud and corruption. The participant reports the results of the investigation to the World Bank, which verifies its completeness and accuracy and then shares selected redacted disclosures with its member countries, management, and staff.

“The long-term purpose of this program is to promote a business environment in which merit-based competition is the norm and ensure that Bank and donor funds are used for their intended purpose—poverty reduction,” said Lee Marler, lead institutional integrity officer in the World Bank’s Department of Institutional Integrity. “The program also helps us learn more about the patterns and players of corruption. We take those lessons from one project to the next.”
Although the VDP is the Bank’s carrot in fighting corruption, it is not an amnesty program or a plea bargain. The terms are non-negotiable, and participants pay most program costs and commit to monitored reform. Although the World Bank keeps participant identities confidential, they remain liable for violations of national law. The Bank also will debar, for 10 years, any participant that continues to engage in misconduct or otherwise materially violates the program’s terms and conditions.

The Hard Way

If the VDP is the carrot, what is the stick? For a company that has engaged in fraud and corruption on a World Bank financed project, there are five potential public administrative sanctions: 1) debarment; 2) letter of reprimand; 3) conditional non-debarment; 4) debarment with conditional release; and 5) restitution.

The third and fourth sanctions are new and were designed to give credit to companies that cooperate fully during investigations and engage in rehabilitative measures like implementation of robust compliance programs.

Since 2001, more than 340 firms and individuals have been publicly sanctioned by the World Bank. Over the past year, the World Bank has appointed a new sanctions evaluation and suspension officer (EO) and put into place a reconstituted Sanctions Board to oversee the sanctions management process.

When the World Bank’s Department of Institutional Integrity uncovers misconduct by a firm or individual, it presents the case to the EO who evaluates whether the evidence is sufficient to issue sanctions. If so, the EO issues a “Notice of Sanctions Proceedings” that recommends a sanction and determines whether a temporary suspension shall come into effect pending the final outcome of the case.

If the firm or individual contests the allegations or the sanction, the case is referred to the World Bank’s Sanctions Board. The Board, comprised of three World Bank staff and four external members, considers the evidence against the firm or individual, along with any response from the accused, before taking a final decision. The Board may hold a hearing as part of its deliberations.

You Choose : Voluntarily “Speak Now” or Take Your Chances

There’s an old phrase that applies to the choice between voluntarily disclosing to the World Bank and keeping mum: Better the devil you know than the devil you don’t. Clearly it makes better business sense for a company to join the Voluntary Disclosure Program than to risk public sanctions. If a company working on Bank supported projects finds evidence of wrongdoing, the best advice is to speak now and sign up for the program where all terms and conditions are known in advance and publicly available.

A company cannot join the VDP after it is under investigation by the World Bank. Should a company find itself in the hot seat, it is wise to cooperate fully with investigators and put in place a robust compliance program immediately to potentially mitigate the sanctions.