Combating Fraud and Corruption

In recent years, IFC has made significant progress in establishing standards for sustainability and corporate governance. IFC has done this by setting appropriate standards, defining expectations and setting out clear procedures for our involvement, both at the outset and during the life of our investment projects and client relationships. These standards have gained broad acceptance. As a result, clients have gained from the reputational and practical enhancements that open adherence to IFC's standards has brought.

Now we want to do the same for anti-corruption and anti-fraud. IFC has identified corruption as among the greatest obstacles to economic and social development. It undermines development by distorting the rule of law and weakening the institutional foundation upon which economic growth depends.

The harmful effects of corruption are especially severe on the poor, who are:

• hardest hit by economic decline
• most reliant on the provision of public services,
• least capable of paying the extra costs associated with bribery, fraud, and the misappropriation of economic privileges.

Corruption damages policies and programs that aim to reduce poverty, so attacking corruption is critical to the achievement of IFC's overarching mission of poverty reduction.

IFC’s aim is to establish clear standards and clarity about what IFC’s standards are to combat fraud and corruption, and what IFC will do if there are allegations against clients or partners. We expect these standards to gain broader acceptance.

As of January 1, 2007, IFC is applying a new approach to combating fraud and corruption related to newly initiated investment financing, as well as technical assistance and advisory projects. Specifically, new procedures will apply to technical assistance agreements, and to investment projects for which IFC has committed financing or issued a guarantee. This new approach is part of a larger effort to combat fraud and corruption. In implementing the new procedures, IFC is working with the World Bank Group’s Department of Institutional Integrity (INT), which is charged with investigating such allegations involving IFC, World Bank, and MIGA projects, as well as allegations of staff misconduct. The enhanced emphasis on combating fraud and corruption does not change the high expectations IFC has always held for its staff, clients and projects, including our due diligence and commitment to good corporate governance. The new program defines this approach even more clearly and adds sanctions as a visible deterrent, but it is consistent with the standards for behavior IFC has long held for itself, its staff, its projects and its partners in development.