Friday, October 08, 2010

A peek into the World Bank fraud department

When people protest the work of the World Bank the first concern they raise is fraud and wasting money. The World Bank itself has a department that is totally devoted to investigating fraud. When a recipient of World Bank money is found to be fraudulent they are barred from receiving any additional funds for a length of time.

From the Guardian, writer Larry Elliot talked to the World Bank president in charge of loan integrity.

Leonard McCarthy is the bank's vice-president for integrity and the man responsible for the ICHN. Yesterday he published an annual report showing that his department's caseload involved 260 projects in 84 countries. As a result of the investigation, the World Bank debarred 45 firms, individuals, and NGOs, preventing them from participating in future bank projects for varying periods of time. The UK publishing house, Macmillan, was one of them - debarred for six years after admitting it had paid bribes to win a contract in southern Sudan.

I put three questions to McCarthy when I saw him this week. First, is the bank committing real resources to tackling corruption? Second, is it doing any more than scratching the surface of the problem? And third, how clean is the bank itself given the amount of money it disburses?

The answer to the first question is that between 2006 and 2010 the budget for the integrity unit rose from $13.3m to $18.7m, with staff numbers increasing from 46 to 98. The bank can say, therefore, that it is putting its money where its mouth is.

Unsurprisingly, McCarthy believes the bank is getting to grips with the problem of corruption, announcing in the past year a cross-debarment deal with four other regional development banks. Bob Zoellick, the World Bank president, said the agreement sent out a message: "steal from one of us, and you will be punished by all".

Refreshingly, the bank admits that with 15,000 staff operating out of more than 180 countries it is bound to have a few bad apples. It opened 54 cases in the last year relating to alleged staff fraud and corruption, a slight rise on the previous year, which it put down to an improved reporting environment rather than an increased incidence of malfeasance.

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