Anticorruption and Integrity

Joint Attack on Fraud

A recent decision of ADB's Oversight Committee on Anticorruption has resulted in debarment of 21 credit unions and 41 individuals in the Krygyz Republic. The anticorruption case began when the National Bank of the Kyrgyz Republic (NBKR) identified fraudulent activity in a subproject of the ADB-financed Rural Financial Institution Project.

In October 2002, NBKR advised ADB that the Financial Company for the Support and Development of Credit Unions (FCCU), created with ADB's support as a source of financing for businesses in rural areas, found fraud involving fictitious membership and financial data in some credit unions. FCCU assists in creating credit unions and rendering financial assistance and advisory services to established and qualified credit unions. Through surveys, audits, and inspections, FCCU identified fraudulent data that formed the basis of credit unions' borrowing from FCCU, which was then used to pay members and finance high-risk ventures not reported to FCCU.

ADB's East and Central Asia Department staff and Anticorruption Unit of the Office of the Auditor General, and NBKR and FCCU worked together to effectively address the fraud. With ADB's support through technical assistance for Capacity Building in Savings and Credit Unions and Microfinancial Systems, FCCU was able to increase scrutiny of credit union assets. FCCU also tightened procedures for increasing capital of any credit union, and strengthened licensing procedures. FCCU ultimately identified fraud in 21 credit unions, and has appropriately classified the debt and undertaken efforts to recover fraudulently obtained funds. NBKR referred FCCU's findings to prosecutors, who so far have convicted 4 of the 41 individuals of wrongdoing. FCCU shared its findings with ADB's Anticorruption Unit, which ensured ADB could complete administrative procedures regarding corruption and fraud.

The cooperation between the Kyrgyz Republic and ADB will support the success of the Rural Financial Institution Project to bring much-needed financial infrastructure to non-urban Kyrgyz Republic.

See also:

• ADB's Anticorruption Policy