Friday, February 09, 2007

World Bank Responds to Fraud and Corruption

World Bank Blacklists More than 100 Firms and Individuals for Fraud and Corruption
World Bank Steps Up Anti-Graft Drive; Blacklists 112 in 2 Years

On Tuesday, the Institutional Integrity Department of the World Bank released a report after investigating 441 cases of fraud and corruption in the use of development funding during 2005 and 2006. Of those cases, 227 involved World Bank staff misconduct, 77 of such allegations were substantiated by investigators. The report noted that the largest number of new cases were reported in East Asia and the Pacific, as well as South Asia.

This is the first report addressing corruption since Paul Wolfowitz became World Bank president in 2005. In order to reduce global poverty, Wolfowitz made it his goal to first fight corruption. Wolfowitz reiterated that “when we [the Bank] find that scarce development dollars have been wrongly diverted from their intended purpose of benefiting the poor, we have a responsibility to take action.” Taking its responsibility seriously, the World Bank has responded to the investigations by “blacklisting” over 100 firms and individuals from future use of World Bank funds.

Additionally, the Institutional Integrity Department introduced new tools to better gauge corruption in bank projects. One such tool is the Voluntary Disclosure Program, which encourages companies that have worked on bank-funded projects to report corruption or fraud in return for the Bank keeping their identities secret.

According to department director Suzanne Rich Folsom, the fraud and corruption investigated in the report included kickbacks, bribes, and overcharging for work. However, Folsom noted that the department is still unsure about how widespread the corruption has become in World Bank projects. Specifically, Folsom identified two investigations that showed one cartel operating in two countries on two different continents in the same sector. She notes that the department is “seeing much more complex schemes that have no boundaries.”

Question: Will the World Bank ever be able to fully combat the threat corruption and fraud have on its overarching goal of reducing poverty?

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