Fighting fraud and corruption in ADB projects

"Asia is the region where the largest number of poor people live. We have to redouble our efforts to eradicate poverty in Asia, and since corruption and poor governance have been major obstacles in reaching this goal, we also have to redouble our efforts to support anticorruption initiatives and to ensure that governance is substantially improved in our member countries. Many developing member countries recognize that corruption must be avoided and governance must be substantially improved." (Haruhiko Kuroda, ADB President, 2012).

The Office of Anticorruption and Integrity (OAI) is the initial point of contact for allegations of integrity violations involving ADB-related activities or ADB staff. Independent since October 2009, OAI’s mission is to ensure ADB and its partners maintain the highest ethical and professional standards, and prevent resources intended to improve the lives of the poor from being used to line the pockets of the unscrupulous.

Combating corruption

Developing good governance and fighting corruption are core ADB strategic objectives and are crucial to effective, transparent and accountable aid, to which ADB committed by endorsing the Paris Declaration on Aid Effectiveness. In accordance with ADB’s Anticorruption Policy, ADB’s zero tolerance to corruption is linked to broader support for governance and improvement in the quality and capacities of developing member countries (DMCs).

In August 1995, ADB became the first multilateral development bank to adopt a policy on governance, and in 1998 approved a comprehensive Anticorruption Policy followed by the Second Governance and Anticorruption Action Plan. In 2006, ADB and other key multilateral development banks (MDBs) adopted the Uniform Framework for Preventing and Combating Fraud and Corruption.

In keeping with ADB’s Strategy 2020, OAI contributes to ADB’s operations in a variety of ways to:

• Investigate and prevent fraud, corruption, collusion, coercion or obstruction in ADB-related activities by conducting independent and objective investigations of alleged integrity violations and presenting findings to the Integrity Oversight Committee (IOC) for possible sanctions.

• Advance awareness of ADB’s anticorruption policy by organizing training activities for ADB staff and external parties; undertaking outreach initiatives to enhance awareness of the insidious effects of corruption on development; and publishing and disseminating information for a variety of audiences.

• Consult and collaborate with other members of the international community, including other multilateral development banks and other international organizations by applying harmonized definitions of integrity violations and prohibited practices and debarring entities that have been sanctioned by one of the participating MDBs.

Investigating complaints

Any party found to have committed a fraudulent or corrupt practice - or any of the other integrity violations identified by ADB - risks being sanctioned as ineligible to participate in ADB-related projects (debarment). To fulfill this role effectively and efficiently, OAI ensures confidentiality and independence in all aspects of its investigative processes.

In 2011, OAI received 225 new complaints of integrity violations. Investigations resulted in the debarment of 31 firms and 34 individuals.

Investigating allegations of fraud in an education project, OAI found that a consulting firm misrepresented the number of international consultants and submitted a host of falsified documents from boarding passes to time sheets to embezzle money. In another case, key officers who created dummy forms and fake companies were debarred indefinitely for fraudulent and collusive practices and bid manipulation. To strengthen transparency, OAI shares observations and investigative findings with operational units, management, and development partners at the conclusion of investigations.

Project Procurement-Related Reviews (PPRRs)

In line with ADB’s framework of managing for development results, OAI proactively conducts PPRRs, which are reviews of ongoing projects that focus particularly on procurement, financial management and asset verification. PPRRs inspect project outputs, assess internal controls, identify irregularities and possible non-compliance, and make recommendations to mitigate and/or eliminated fraud, corruption, or abuse of resources. PPRRs are always done in close cooperation with the governments concerned, ensuring ownership and proper follow-up of conclusions and recommendations. OAI also provides support, assistance, and training to operations departments, resident missions, and supreme audit institutions in the countries involved.

With techniques to commit fraud and corruption in ADB financed projects becoming increasingly complex and sophisticated, OAI is increasingly pursuing red flags identified in PPRRs.

Knowledge support and awareness-raising

ADB is recognized as a leader among multilateral development banks (MDBs) for its in-house anti-fraud and corruption initiatives. OAI actively works with other ADB departments to formulate and develop Bank-wide policy and operational measures relating to integrity. OAI’s investigative team is also supported by industry-leading IT systems to ensure confidentiality and efficient case management.

OAI recognizes that ADB staff form the front line in ADB's fight against corruption and are obligated to uphold the highest professional and ethical standards. OAI organizes knowledge support activities to improve integrity awareness and skills. Since 2010 it is mandatory for all staff to be briefed on the importance of fighting corruption. The “Say No to Corruption” briefings stress adherence with ADB’s Anticorruption Policy from the very beginning of an ADB staff member’s career. Follow-on refresher courses as well as specialized workshops on fraud and corruption prevention are also conducted.

Partnerships

ADB’s member countries and projects span the globe, making it critical in the fight against fraud and corruption that MDBs and international financial institutions form a united front.

ADB has actively engaged in global, regional, and national partnerships among governments and institutions to fight corruption and fraud more effectively, such as the ADB/OECD Anti-Corruption Initiative for Asia and the Pacific.

Following the Harmonized Framework adopted by MDBs in 2006, the Agreement on Cross-Debarment was signed by ADB, the World Bank Group, the African Development Bank (AfDB), the Inter-American Development Bank (IADB) and the European Bank for Reconstruction and Development (EBRD) in Luxembourg on 9 April 2010. An important global milestone in the fight against corruption, this Agreement allows that an entity debarred by one of the participating MDBs be subsequently cross-debarred by the other participating MDBs, and constitutes an important step in strengthening global anticorruption efforts.

ADB has since notified partner development banks of sanctions imposed on 11 firms and 16 individuals found to have breached anticorruption policies. In turn, ADB cross-debarred 57 entities sanctioned by the World Bank, and four firms sanctioned by EBRD. A new, secure internet portal was also set up to give government officials of ADB's developing member countries access to a full list of sanctioned groups and individuals.

"These are serious steps we have taken to help reduce fraud, raise awareness about potential irregularities in project implementation, and to increase understanding of ADB's anticorruption efforts," said Peter E. Pedersen, Head of ADB's Office of Anticorruption and Integrity.