Monday, April 12, 2010

Multilateral Development Banks (MDBs) Collaborate to Fight Corruption

Last week, the leading Multilateral Development Banks (MDBs) signed an Agreement for Mutual Enforcement of Debarment Decisions designed to fight fraud and corruption.  The MDBs signing the new agreement include the African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank Group and the World Bank Group. 

The agreement has a direct impact on cooperation between the sanctioning mechanisms of MDBs.  Typically, MDBs sanction entities via reprimand, conditions on future contracting, or debarment.  Debarment is a declaration that an entity is no longer eligible to bid on projects funded by financing flowing from an MDB for a period of time.  The new agreement only applies to instances of debarment for a period of more than one year and only where they are made public by the sanctioning MDB.

Under the new agreement, when any one of the signatories publically debars an entity for more than one year, all  the other signatories will do the same.  For instance, if a contractor fraudulently diverts money from a World Bank project resulting in debarment, all of the other signatories will blacklist that contractor from bidding on future projects funded by them for a period of time.  In addition to abiding by the agreement, all of the signatories will continue to manage their own independent strategies to prevent fraud and corruption.

This agreement is a validation of the MDBs’ commitment to a 2006 agreement as part of the International Financial Institutions Anti-Corruption Task Force.  The parties to the 2006 agreement promised to harmonize their definitions of practices that are subject to sanctions and to share information to combat fraud and corruption.

The World Bank reported this cross-debarment agreement in a Press Release and a News Article.

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