The Asian Development Bank (ADB)’s Office of Anticorruption and Integrity (‘OAI’) has released its 2016 Annual Report entitled Fighting Corruption is MY Responsibility (the ‘Report’).
OAI’s external mandate is carried out by its Investigations Division which reviews complaints and conducts investigations into allegations of integrity violations; the Due Diligence Unit undertakes its integrity due diligence functions, whilst the Review and Outreach Unit handles project procurement-related reviews and capacity development activities.
The ADB defines ‘integrity violations’ as any act which violates ADB’s Anticorruption Policy, including corrupt, fraudulent, coercive and collusive practices, the four sanctionable practices which are harmonised across other Multilateral Development Banks (‘MDBs’).
Somewhat surprisingly, the Report starts with the topic of Enhancing Tax Transparency in Asia and the Pacific. By approving an update to its Anticorruption Policy, the ADB has added its weight to the fight against tax secrecy, tax evasion and aggressive tax planning which erode domestic tax bases of the ADB’s developing member countries. That update will – according to OAI – support developing member countries to protect themselves against tax evasion, base erosion and profit shifting (‘BEPS’) and is significant because it is wider in scope than the traditional role of MDB anticorruption and integrity departments.
OAI reports that it had 211 open complaints from previous years and received 258 new complaints in the year 2016. Some 73% of the complaints received related to projects, 17 % to ADB staff and 10 % to ‘others’. The majority of complaints came to OAI via email, which is an indication both of the impact of technology on the operations of the Department and the ease with which complaints about companies and individuals may be made. From those, the focus of investigations was 53% on projects, 37% on ADB Staff with the remaining 10% falling within others. The sources of the complaints also makes for interesting reading, with 61% coming from parties external to the Bank and 35% from ADB staff, whilst only 2% came from audit reviews with the remaining 2% from anonymous sources. Despite these figures, the Report emphasises OAI’s proactive use of Project Procurement-Related Reviews (‘PPRRs’) of on-going ADB-financed projects. Once again, their scope is wide, for they seek to identify ‘noncompliance issues, irregularities, and integrity concerns, with respect to project procurement, disbursements, and delivery of project outputs’ and so firms which are working on Bank-financed contracts must remain diligent to ensure that staff and contractors continue to comply with the strict requirements that come with working with an MDB.
‘Fraud’ accounted for 73% of new investigations in 2016 and OAI explained that investigations into corruption, coercion and collusion remained low due to the difficulty in establishing these sanctionable practices. Indeed, it should be remembered that the threshold for an allegation of fraud within the MDB sanctions regime is extremely low: the mere inclusion of a CV for someone whom the company knows is unavailable or where it is reckless as to that availability may give rise to liability, sanction and extremely serious consequences for a company, including debarment.
OAI stated that it continued to fight corruption through both enforcement and prevention. In 2016, 138 entities, including 98 firms and 40 individuals were debarred as a result of integrity violations, bringing the cumulative total number of firms debarred to 1,261 by the end of the year. Indeed, under the agreement with other MDBs to mutually enforce each other’s debarment actions, the ADB cross-debarred 86 firms and 47 individuals and submitted 10 firms and eight individuals for cross-debarment to participating MDBs. Further, nine firms and one individual were conditionally non-debarred, whilst temporary suspension, a measure which was first introduced in 2013 in the ADB, was issued to one firm and one individual in the year 2016. OAI also completed 33 investigations where ADB staff were found to have engaged in integrity violations, 11 of whom received disciplinary sanction.
Surprisingly, OAI received a mere six appeals in 2016, involving just three firms and six indivduals; five of these and two pending from 2015 were denied because they did not meet the requirements for an appeal to be considered by the Sanctions Appeals Committee, a point which demonstrates the importance of engaging specialist counsel to advise on and prepare such matters.
OAI used its investigative findings to make recommendations in respect of preventive measures and by requiring subjects of investigations to improve their governance and integrity processes through conditional non-debarments, debarments with conditions and reinstatement processes.
The ADB views integrity violations as potential reputational risks and with that in mind, ADB project teams submitted 300 Integrity Due Diligence (IDD) advisory and review requests to OAI’s Due Diligence Unit, covering 644 entities. This was an 86% increase in the number of entities reviewed from 2015. OAI’s Due Diligence Unit was created in response to an increased need for ADB to evaluate and minimise integrity and reputational risks in its private sector projects, as well as taking into account its increased lending and development initiatives involving private companies; indeed, 52% percent of the total entities reviewed were actually identified by the Private Sector Operations Department.
In addition, there is a separate independent grievance process – ADB’s Accountability Mechanism – which receives complaints from entities which claim to have been adversely affected by an ADB-financed project which has resulted from the ADB’s noncompliance with its operational policies and procedures. The major areas of complaint are resettlement, compensation and land acquisition, and adverse environmental impacts.
The lawyers at Bretton Woods Law have unique and unparalleled experience of assisting companies and individuals with their interactions with the OAI. If you have any questions arising out of the issues raised in this article, do not hesitate to contact a member of the team via firstname.lastname@example.org