In an effort to root out corruption and fraud affecting its extensive projects around the world, the World Bank has blacklisted more than 250 entities in the year to date, ranging from major multinationals to smaller firms and individual consultants.
The figure is four times the number of debarments in 2012, and more than the total number issued in the past seven years combined, according to new research conducted by Freshfields Bruckhaus Deringer’s global investigations practice.
The Bank has also penalised a further 91 contractors and consultants by imposing sanctions other than debarment, such as compliance and monitoring requirements.
Investing over $200 billion to finance projects in developing countries around the world since 2008, the World Bank has the authority to investigate and debar both major multinationals and smaller firms for bribery, bid-rigging, fraud and other wrongdoing related to projects which it funds.
While debarment activity by the World Bank and other multilateral development banks (MDBs) has grown substantially over the past seven years, in just the past 12 months, the World Bank has debarred 307 entities, of which 283 were companies, including 42 unique corporate groups. Those numbers include 23 cross-debarments under a 2010 agreement among five of the largest MDBs.
"These numbers reflect the tragic fact that much of the aid sent to the world’s poorest countries is stolen," says Tim Coleman, a global investigations partner at Freshfields. "By some estimates as much as $40bn has been lost."
Coleman notes that when a major company is implicated in illegal activity, reputations can be seriously damaged and it can stand to lose large contracts and the ability to bid for future ones for years to come.
Geographically, the highest proportion of currently blacklisted entities are based in North America (29%) followed by Latin America and the Caribbean (21%); Europe and Central Asia (21%) and East Asia and The Pacific (16%). Canada had the most debarred entities (119), followed by the US (46), Indonesia (43) and the United Kingdom (40).
"Although the World Bank’s public statements focus on bribery and other forms of corruption, the vast majority of its sanctions cases to date have involved fraud, such as forgery or misrepresentation in bidding documents. These are typically easier to prove," says Coleman.