A guest blog by Bernard O’Donnell, Head of Fraud Investigations at the European Investment Bank (EIB), and Sabine Zindera, Vice President, Legal and Compliance at Siemens AG and head of the Siemens Integrity Initiative.

When companies are sanctioned for wrongdoing, is there a way to turn the punitive sanction into a positive force – not only for those wronged, but for wider business integrity around the world?

There is. Exhibit number 1 is a settlement agreement signed in 2013 between the EIB and Siemens AG that addresses alleged past violations of the EIB Anti-Fraud Policy (see the EIB and Siemens press releases).

As part of the settlement, Siemens committed to provide funds totalling EUR 13.64 million to organisations that support projects or other initiatives that promote good governance and the fight against corruption.

It was agreed that the money would be disbursed under the umbrella of the Siemens Integrity Initiative, a USD 100 million funding mechanism established following a separate agreement that Siemens had reached with the World Bank in 2009.

Nearly a decade on, the EIB has seen the very positive progress that Siemens has made in not only taking appropriate action to remediate past cases of corruption, but also in funding a host of impactful integrity projects around the world. The company is clearly taking an active role in improving the broader situation and has pushed the anti-corruption agenda forward on a local and global level, notably by fostering Collective Action against corruption.

Supporting the rise of Collective Action for fair and sustainable business

“Collective Action” in general refers to action taken together by a group of like-minded and/or interested parties to try to achieve a common objective. In this case, Siemens committed to fostering the use of Collective Action to promote greater integrity, to level the playing field and to mitigate business risks.

Back then, Collective Action was an innovative idea. Now, it is rapidly becoming part of mainstream anti-corruption compliance practice, as companies, governments and civil society representatives see the benefits of working together to overcome hurdles to clean business.

In total, the Siemens Integrity Initiative has supported 85 projects in over 50 countries across the three Funding Rounds and so-called Golden Stretch Round, and increased its committed funding to nearly USD 120 million. All projects are detailed in the Initiative’s annual reports, which tell a powerful story about the growing maturity and reach of Collective Action.

Commenting on the Golden Stretch round, of which the Basel Institute is one of the eight organisations selected for additional funding, Sabine Zindera said:

“In selecting the projects to be supported, we placed particular emphasis on how the sustainability of their activities and results can be ensured beyond 2024, and on how our partners will inspire, support and engage local non-governmental organisations and the public and private sectors through their longstanding networks and institutional standing. We are pleased to again support diverse projects in order to promote fair competition and fight corruption with a portfolio balanced by region and topic.”

The EIB sees the value of Collective Action to combat corruption and agrees that the results are now clear: the projects have been positive for both EIB and Siemens in terms of resolving the past issues relating to the settlement. Globally, they have also had a significant impact in terms of governance and cleaner business.

Settlements that make sense

Siemens was the first company to set up such a fund as part of a settlement with a multilateral development bank (MDB). Since then, EIB has signed similar settlement agreements with companies including Volkswagen and, more recently, JSC Nenskra Hydro and Hyundai Engineering & Construction Co.

Although such settlement agreements are not always appropriate, in some cases there may be suitable possibilities to include a sanction that requires the company to make additional efforts and commitments that are not purely monetary.

Proactive coordination to combat private-sector corruption

This constructive approach to settlements chimes with the proactive coordination that exists between MDBs in relation to corruption and fraud.

The six MDBs, including the World Bank and EIB, all share common definitions of fraud and corruption thanks to the 2006 Uniform Framework for Preventing and Combating Fraud and Corruption. The Framework also introduced guidelines and principles to conduct investigations.

The MDBs also have consistent policies on sanctioning those found to have engaged in such wrongdoing, including the Cross-Debarment Agreement signed in 2010 by the MDBs with the exception of EIB. This enables participating MDBs to mutually recognise certain sanctions imposed by any of the signatory institutions against firms and individuals found to have engaged in prohibited practices.

The bottom line

The mid-term review of the Siemens Integrity Initiative (see page 90 onwards in the 2017 Annual Report) concluded that there is “strong evidence” that the Siemens Integrity Initiative-funded Collective Action projects have “achieved their intended short-term results” and made “significant contributions to change within their respective contexts”.

It is “the passionate and committed work of Integrity Partners and the Siemens Munich Project Office that has helped promote, enhance the visibility of, and contribute to learning on Collective Action, including demonstrating to the private sector that there is a business case for investing in Collective Action”, it continued. In so doing, said the report, “the Integrity Initiative has made valuable contributions to the global fight against corruption”.

The story is not over yet, and we are all looking forward to seeing the fruits of anti-corruption Collective Action blossom and mature over the coming years. Visit the B20 Collective Action Hub, developed and maintained by the Basel Institute on Governance, for more on Collective Action and ways to get involved.

About the authors

Bernard O’Donnell is Head of Fraud Investigations at the European Investment Bank (EIB). In his current position, Bernie oversees investigations into allegations of fraud, corruption and other prohibited conduct affecting EIB Group financed projects and activities in collaboration with national law enforcement and prosecution offices, along with the investigation offices of other international financial Institutions and the European Public Prosecutor’s Office and OLAF.

Sabine Zindera is Vice President, Legal and Compliance at Siemens AG and head of the Siemens Integrity Initiative. In this role she leads Siemens´ global Collective Action activities, helping to build alliances against corruption to foster clean business and to support fair market conditions. As part of this, she also manages Siemens' relationships with international and non-governmental organisations around the world.