Recap from World Bank's Online Discussion on Corruption

Interview with Suzanne Folsom on Fraud and Corruption

Last Thursday, Suzanne Folsom, director of World Bank’s Department of Institutional Integrity, led an online discussion focusing on fraud and corruption in light of the department’s recent report. (For more information on the report, see our previous post entitled “World Bank Responds to Fraud and Corruption” on February 9, 2007, at http://uicifd.blogspot.com/2007/02/world-bank-responds-to-fraud-and.html).

Ms. Folsom briefly addressed concerns regarding World Bank conditionalities. Although this is not her area of expertise, she did disclose that the Bank is continuingly trying to improve upon these terms to World Bank lending. According to Ms. Folsom, “conditions designed to make sure the money goes where it belongs are a good thing.”

Additionally, Ms. Folsom recognized the World Bank’s lack of knowledge regarding the scope and frequency of corruption. Reiterating findings from the Integrity Report, Ms. Folsom said that although the World Bank has a fairly good understanding of how their projects can be vulnerable to corruption, they know little about amount of corruption. Thus, she was unable to estimate the percentage of World Bank projects affected by fraud and corruption.

Ms. Folsom then addressed how the World Bank is working to overcome the widespread corruption on three different levels: (1) At the country level, the World Bank is working on projects and programs with borrowers; (2) At the individual project level, the Bank is addressing risks in their loans and doing individual investigations; (3) On the global level, the Bank is working with the private sector, civil societies, and others.

When the Bank finds that corruption or fraud has affected a project, the bank takes the necessary steps to disbar the supplier, which means that the Bank makes sure that the individual or firm does not receive any more contracts for a certain period of time. According to Ms. Folsom, “naming and shaming” suppliers has proven to be a big deterrent of fraud and corruption, since the firms and individuals know that having their name on the “corrupt” list will result in losing future business.

Ms. Folsom also addressed the concern that the department’s reports must be given to the Bank’s senior management, who have the power to sit on the reports without taking action. According to Ms. Folsom, President Wolfowitz has made fighting fraud and corruption a priority, and the Bank is working on the rumors that the department’s reports were not taken seriously. Although much work needs to be done on this front, Ms. Folsom believes that the Bank is making vast improvements.

Questions:
1. How important do you think the Department of Institutional Integrity is to combat corruption and fraud within the World Bank and its funded projects?

2. Did you find the online discussion helpful? What more could the World Bank do to assure the public that fighting fraud and corruption is one of its main goals? Have you seen improvement in this endeavor since Wolfowitz became president in 2005?