World Bank Sanctions Board should better use existing remedies, chairman says

Earth and the moon

12 September 2017. By Robert Thomason.

The World Bank Sanctions Board should use its existing tools more creatively rather than expand the number of remedies it could impose on offending parties, its chairman said.

J. James Spinner said the most common sanction in the board's "toolbox" is conditional debarment, which disqualifies a party from World Bank contracts for a set minimum period of time and until it has met certain requirements. "The conditionality that is imposed can be more creative," Spinner said at a presentation* on the future of the World Bank's sanctions system, adding that he would like to see that happen more often.

Spinner said that adding more sanctions to the Sanctions Board's authority would require modification of many policies.

The bank employs a two-tier system. In the initial phase, a sanctions officer examines alleged infractions by companies or individuals — often bribery or other corrupt acts. If evidence warrants, a sanction is imposed. The second tier comes into play if an unfavorable decision is appealed: The Sanctions Board conducts a review of the case and holds a hearing, then publishes a decision detailing the reasoning for any sanction given.

Other sanctions include debarment for a fixed term, imposing conditions on the party for any further work with the bank, reprimand the party, and order restitution.

Faisal Siddiqui, assistant chief compliance officer for the World Bank Group's International Finance Corp., said that the bank most often only uses a couple of these five tools.

"We should be using all of our tools" before adding others, Siddiqui said.

Sanctioning public officials

Sanctions Board member Olufunke Adekoya, however, suggested considering the sanction of public officials found to have participated in corruption affecting World Bank projects.

"Perhaps that is something we should look at," Adekoya said.

When an audience member asked earlier about sanctioning public officials, World Bank anticorruption official Maria Vannari said the bank has often been asked about its approach to dealing with bribe-taking or otherwise corrupt public officials, though its formal sanctions system is designed to deal with the private sector.

There are legal remedies that can be pursued against corrupt public officials, added Vannari, the World Bank's lead operations officer for financial management and anticorruption. For example, the bank can refer a case of corruption to national authorities.

Panelists said the bank can suspend a project component or an entire project involving a corrupt official, or it can suspend the entire portfolio of loans to a country in response to public corruption.

Mentor program

Lisa Miller, a World Bank integrity compliance officer, said that a new pilot mentoring program has been designed to advise companies that are facing sanction compliance conditions for the first time.

Sanctioned firms generally are required to establish an integrity compliance program geared toward preventing further lapses in conduct. For small or medium-sized companies, this type of condition might involve unfamiliar procedures, Miller said. Such a firm might benefit from peer-to-peer mentoring from a business in its sector whose employees or officers are fluent in the same language, she said.

Companies that were sanctioned and subsequently met the World Bank's conditions are asked if they would be willing to volunteer to serve as mentors for recently sanctioned firms.

Panelists said that the sanctions system, in addition to being punitive, can also be used as a way to transform noncompliant firms into firms that are capable of being good partners with the bank.

The bank recently said that it is giving consideration to companies that self-report misconduct, allowing them to remain eligible to receive World Bank contracts if they meet relevant conditions.

*10th Anniversary of the World Bank Group's Two-Tier Sanctions System. Washington, DC., Sept. 11, 2017

	Eliot Gao