Business entities wishing to implement projects funded by Multilateral Development Banks (MDBs, also referred to as International Financial Institutions) will be interested to know that six major MDBs have agreed and published new General Principles for Business Integrity Programmes. Such programmes play an important part in the MDBs’ efforts to fight fraud and corruption in the projects they finance or otherwise support.

These General Principles provide non-exhaustive, non-binding guidance for business entities that implement such projects. Notably, they recommend engagement in Collective Action to encourage other business entities to implement integrity programmes as well.

In this guest blog, Lisa Miller of the World Bank Group and Duncan Smith of the European Investment Bank explain, especially for businesses seeking to implement MDB-financed projects, what the General Principles are and the role business integrity programmes play in MDBs’ anti-fraud and anti-corruption efforts.

Six major Multilateral Development Banks (MDBs)—the African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), Inter-American Development Bank (IDB), and World Bank Group—have agreed and published new General Principles for Business Integrity Programmes.

The MDBs provide essential support for development projects in countries seeking assistance, in particular financial support. They are public, not commercial, multilateral lending institutions. The MDBs, among other things, lend money to their member countries (public borrowers) to carry out key development projects, which the borrowers implement.

The projects often involve the purchase of goods, works, and services through public procurement systems in which private entities seek to win contracts under the MDB-supported projects.

Unfortunately, some entities seek to improperly influence (e.g., via bribes) or otherwise distort the process, such as through the submission of fraudulent information in a bid for such contracts. The potential for misconduct also exists throughout the project lifecycle.

MDB expectations and control mechanisms

It is essential that the funds provided by the MDBs are used for their intended purposes and are not misused, whether by borrowers or by the entities that compete for or win contracts under MDB-supported projects. The MDBs therefore expect entities participating in such projects to maintain the highest standard of integrity.

The MDBs’ expectations in that regard are set out in financing agreements with borrowers and contracts entered into between borrower agencies and the contractors and consultants that work under such projects. The MDBs also have in place mechanisms to monitor related procurement processes and contract performance.

In addition, each MDB has an integrity function, to which any suspected misuse of funds or other prohibited practices under such projects should be reported. In this respect, the MDBs have adopted harmonised definitions of fraud, corruption, collusion and coercion (commonly collectively referred to simply as “fraud and corruption”) which are set out in the International Financial Institutions Uniform Framework for Preventing and Combating Fraud and Corruption (the Framework).

If an allegation has been investigated by an MDB (or MDBs if the project is co-financed) and a finding of misconduct has been substantiated, each MDB has an internal administrative process to sanction those who have engaged in such misconduct (e.g., debarment or exclusion). [1]

Moreover, some MDBs have signed an Agreement for Mutual Enforcement of Debarment Decisions among Multilateral Development Banks, commonly referred to as the Cross-Debarment Agreement, under which an entity that is debarred by one MDB for an initial period exceeding one year also generally is debarred by the other MDBs. [2]

The role of business integrity programmes

A business integrity programme should clearly articulate an entity’s values, as well as the policies and procedures used to prevent, detect, investigate and remediate misconduct in the entity’s operations.

As set out by the MDBs in their respective policies and procedures, an entity’s business integrity programme is often relevant in connection with the MDBs’ frameworks for investigating and sanctioning fraud and corruption. For example, the business integrity programme of a company that is accused of misconduct may be considered in an MDBs’ investigation and sanctions proceedings, such as in determining an appropriate sanction.

In addition, when an entity is sanctioned by an MDB, the MDB may impose conditions for the entity’s reinstatement or release from sanction that require the entity to develop and implement a business integrity programme. In such cases, whether the entity has put in place and is effectively implementing a programme designed to prevent, deter, detect, investigate and remediate prohibited practices will be considered by the MDB in its assessment of the entity’s application for reinstatement or release from sanction.

As effective business integrity programmes become more common among the entities that participate in MDB-supported projects, it is hoped that the risk of misconduct in such projects will decline. As Principle 29 of the document makes clear, Collective Action can help to encourage the widespread adoption of effective business integrity programmes.

Business integrity programmes therefore play an important part in MDBs’ efforts to fight fraud and corruption in the projects they support.

The General Principles are intended as non-exhaustive, non-binding guidance relating to business integrity programmes in the context of MDB-financed projects. Companies also may wish to refer to the General Principles as guidance for their programmes in other contexts. Indeed, it is a good business practice to have such a programme in place, and to implement the programme consistently and effectively, as a standard approach to doing business.

In addition, the General Principles are intended to be adaptable to entities of all types and sizes that are operating in various environments. The policies and procedures comprising a business integrity programme should be based on a comprehensive risk assessment of the entity’s operations and should be tailored accordingly. The programme should address and include provisions intended to minimise the occurrence of the identified risks, and it should be structured such that it will accommodate changing circumstances and evolve over time.

Core elements of a programme

While a programme should reflect an entity’s own circumstances and integrity risk profile, key features, such as those set out in the General Principles, should be incorporated into the programme as appropriate.

The General Principles cover the following core principles, among others:

• Risk Assessment
• Prohibited Misconduct
• Management Roles
• Integrity Function
• Internal Controls
• Reporting, Investigation, and Remediation
• Training, Communication, Advice, and Accessibility
• Business Partners
• Collective Action/External Engagement

In conclusion

The General Principles set out important guidance relating to the MDBs’ efforts to ensure the funds they lend to states are used only for development purposes. The General Principles are intended as guidance relating to the prevention of fraud and corruption and can be adopted and implemented by entities in all sectors and of all sizes.

The General Principles may be found at Cross Debarment (adb.org) including an Appendix that sets out additional guidance relating to the core principles.

Notes

[1] MDB investigation teams also may refer suspected criminal conduct to relevant law enforcement agencies that have the full range of criminal investigation tools (e.g., search and arrest warrants).

[2] For legal reasons, EIB did not sign the Cross Debarment Agreement but recognizes that the debarment should be identified and disclosed under the EIB Covenant of Integrity (EIB Guide to Procurement, Annex 3).

About the authors

Lisa Miller is the World Bank Group Integrity Compliance Officer and heads the Integrity Compliance Office in the World Bank Group's Integrity Vice Presidency. She previously was a Senior Counsel in the World Bank's Legal Vice Presidency, focusing on sanctions and legal procurement matters. Prior to joining the World Bank, she was in private legal practice in Boston and Washington, DC, where her practice focused on integrity compliance, sanctions, public procurement, and corporate matters. 

Duncan Smith will soon retire as Deputy Head of Investigations at EIB. After passing the English Bar, he prosecuted corporate fraud & corruption cases at the UK’s DTI & SFO. He then spent 7 years at World Bank Investigations (as Team Leader, later Policy Adviser); he moved to EIB in 2007 to investigate large cases and address prevention/deterrence/outreach & negotiate settlements. He co-authored the International Financial Institutions Anti-Corruption Uniform Framework Agreement (2006) & MDB harmonization documents (e.g., General Principles on Settlements). He has written many articles on the subject, including for Basel Institute on Governance & FCPA Blog and has authored two books: Promoting Integrity in the Work of International Organisations: Minimising Fraud and Corruption in Projects (2021) and Fraud and Corruption: Cases & Materials (2022).