Freshfields Report – World Bank Blacklists More Companies Than Ever

Freshfields Report - World Bank Blacklists More Companies Than Ever
    • Increased activity establishes the World Bank as a major global regulatory player
    • Healthcare, transport, agriculture, water and energy most impacted sectors
    • North America, Latin American and the Caribbean key hotspots for blacklisted entities, notably, Canada and the US

    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. In just the past 12 months, the World Bank has debarred 307 entities, of which 283 were companies and 42 unique corporate groups.

    Those numbers include 23 cross-debarments under a 2010 cross-debarment agreement among five of the largest MDBs.

    The Bank has also penalized a further 91 contractors and consultants by imposing sanctions other than debarment, such as costly compliance and monitoring requirements over the past eight months.

    The Freshfields analysis also revealed that five sectors make up two-thirds of the Bank’s investigations that can lead to debarment: healthcare, transportation, agriculture, water, and energy.

  • Locations of currently debarred firms
  • 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).

    The similarity between the World Bank and global regulatory regimes is further exemplified in the Bank’s 2010 adoption of a settlement mechanism (not unlike deferred prosecution agreements used by regulators in the US and elsewhere). It typically includes a term of debarment, cooperation obligations and monitoring of compliance. This mechanism, which is expected to grow in use, has resulted in major corporate settlements, including one involving Canada’s largest engineering group, SNC Lavalin’s groundbreaking ten-year debarment.

    The World Bank means business. Its ramping up of activity levels in 2013 is a clear signal that it is not prepared to tolerate any corruption or fraud affecting its programs. Contractors around the world servicing the Bank and those who are hoping to win a slice of work on its substantial programs would be well advised to tighten their anti-bribery and corruption policies and procedures.

    Establishing its regulatory role by affirming its independence and accountability

    Given the attention that the World Bank has received for its policing of malfeasance on projects it has funded, and the inherent risk to companies and individuals who are involved in any World Bank-backed project, questions have arisen as to the independence and accountability of the Bank’s debarment regime, and its treatment of corporate groups under investigation. To address these issues, the Bank recently concluded an internal review of its debarment regime and opened a consultation in July to solicit input from external stakeholders.

    *Data through July 2013 and also reflect changes to World Bank reporting

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