Multilateral Development Banks (MDBs) Collaborate to Fight Corruption

Last week, theleading Multilateral Development Banks (MDBs) signed an Agreementfor Mutual Enforcement of Debarment Decisions designed to fight fraud andcorruption.  The MDBs signing the newagreement include the African Development Bank Group, the Asian DevelopmentBank, the European Bank for Reconstruction and Development, the Inter-AmericanDevelopment Bank Group and the World Bank Group. 

The agreement has adirect impact on cooperation between the sanctioning mechanisms of MDBs.  Typically, MDBs sanction entities via reprimand,conditions on future contracting, or debarment. Debarment is a declaration that an entity is no longer eligible to bidon projects funded by financing flowing from an MDB for a period of time.  The new agreement only applies to instancesof debarment for a period of more than one year and only where they are madepublic by the sanctioning MDB.

Under the newagreement, when any one of the signatories publically debars an entity for morethan one year, all  the other signatorieswill do the same.  For instance, if acontractor fraudulently diverts money from a World Bank project resulting indebarment, all of the other signatories will blacklist that contractor frombidding on future projects funded by them for a period of time.  In addition to abiding by the agreement, allof the signatories will continue to manage their own independent strategies toprevent fraud and corruption.

This agreement is avalidation of the MDBs’ commitment to a 2006agreement as part of the International Financial InstitutionsAnti-Corruption Task Force.  The partiesto the 2006 agreement promised to harmonize their definitions of practices thatare subject to sanctions and to share information to combat fraud andcorruption.

The World Bankreported this cross-debarment agreement in a PressRelease and a NewsArticle.

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