One way that IFC combats fraud and corruption is through a Sanctions Process against firms or individuals that have engaged in fraud, corruption, coercion, collusion or obstruction related to its investment and advisory services projects. The Sanctions Process is part of a larger effort to combat fraud and corruption.
The Sanctions Process is a two-tier administrative process and is designed to be a fair and transparent way to evaluate allegations of fraud and corruption in any IFC project.
Allegations that a firm or individual has engaged in Sanctionable Practices are investigated by the World Bank Group’s Integrity Vice Presidency (INT). If INT believes there is sufficient evidence to substantiate the allegations, the case is referred to IFC’s Evaluation Officer, the first tier of the two-tier administrative sanctions process.
The firm or individual can choose not to contest the allegations or the recommended sanction, in which case the recommended sanction is imposed. If the firm or individual does contest the allegations or the recommended sanction, the case is referred to the World Bank Group’s Sanctions Board—the second tier of the two-tier administrative sanctions process.
IFC counterparties who engage in a sanctionable practice may be “debarred.” Debarment makes the debarred party ineligible to do business with the World Bank Group for a specific period of time, and notice of such debarment is posted on a public website.
Five kinds of acts are defined – Corrupt Practices, Fraudulent Practices, Collusive Practices, Coercive Practices and Obstructive Practices. The definitions together with interpretive guidance are found in the document Sanctions Definitions and Interpretations [pdf].
The Sanctions Process applies to any IFC counterparty, which would in general include IFC borrowers; companies in which IFC makes an investment (both direct and indirect); companies who borrow or issue debt securities with the support of IFC guarantees; sponsors; Advisory Services recipients; and Advisory Services' consultants and service providers.
After INT investigates allegations of Sanctionable Practices in IFC projects, the first step in the Sanctions Process is conducted by the IFC Evaluation Officer who determines:
(1) whether the evidence submitted by INT in a proposed Statement of Accusations and Evidence is sufficient to support a finding that a respondent engaged in any corrupt, fraudulent, coercive, collusive or obstructive practice, or violated a material term of the Voluntary Disclosure Program (VDP)Terms and Conditions; and
(2) whether the respondent should be temporarily suspended from becoming an IFC Counterparty pending the final outcome of the sanctions process.
In addition, the IFC Evaluation Officer will recommend a sanction to be imposed on the respondent, which would become effective only if the respondent elects not to challenge the allegations against it by appealing to the Sanctions Board.
In the second part of the process, the Sanctions Board members will review and make final decisions regarding sanctions cases when a respondent contests the allegations and/or the decision of the IFC Evaluation Officer.
Accused parties have the right to defend themselves by appearing in person and presenting evidence and written responses before the Sanctions Board. Cooperation with INT by accused parties will be considered as a positive factor in evaluating the appropriate sanction. Similarly, efforts to frustrate an INT investigation may lead to more serious sanctions.
The majority of the Sanctions Board members are senior figures not affiliated with the World Bank Group. A final decision is made by the Sanctions Board. Such decision may not be overruled by IFC. The procedures are found in the document Sanctions Procedures [pdf].
For an easy-to-understand graphic explanation of the World Bank Group sanctions system, including the pertinent deadlines refer to the Sanctions System Flowchart.
There are five possible administrative sanctions: Public Letter of Reprimand, Debarment, Conditional Non-Debarment, Debarment with Conditional Release, or Restitution.
Debarment with conditional release is the default or “baseline” sanction for cases initiated under the WBG 's revised Sanctions Procedures effective January 2011. Going forward the establishment (or improvement) and implementation of an integrity compliance program satisfactory to the WBG will be a principal condition to ending a debarment (or conditional non-debarment); or in the case of some existing debarments, early termination of the debarment.
The identity of each sanctioned party and the sanctions imposed shall be publicly disclosed. Click for more information on FAQs on Cross-Debarment.
Any legal agreements between the sanctioned party and IFC will continue to be governed by the applicable law, contractual agreement and dispute resolution provisions as set out in the agreements.
As of May 2011, more than 400 firms and individuals have been publicly sanctioned by the World Bank (visit http://www.worldbank.org/debarr for the full list of debarred firms and individuals).