The World Bank has so far debarred over 250 companies in 2013 higher than the total number of debarments for the last seven years combined reports the FT.

In contrast, last year, less than 100 entities worldwide were declared ineligible to be awarded a Bank-financed contract due to their corrupt or fraudulent behaviour.

A problem shared is a problem multiplied

The recent SNC-Lavalin debarments (flowing from a widely publicised corruption investigation) where debarments of 10 years were meted out to group companies are a stark reminder of what can happen to international construction and engineering firms if they bury their heads in the sand. The ripples of the World Bank investigation continue with criminal charges now being levelled at individuals alleged to have been personally involved as recently as this week.

Under World Bank’s guidelines on corporate groups, failing to supervise and turning a blind eye to misconduct can lead to parent companies being disciplined by the World Bank for the actions of their subsidiaries.

Double trouble. And more.

Compounding the risks the World Bank shares materials relating to its investigations with the ‘prosecuting authorities of its member countries’.

In the 2012 Integrity Vice Presidency report, the World Bank disclosed that it had referred 46 of its investigative findings to agencies and national authorities.

The 2010 UK Serious Fraud Office (SFO) investigation into Macmillan Publishers Limited was instigated as a result of information exchange with the World Bank is a ‘nice’ illustration of what can happen.

All for one and one for all.  Cross-debarment compounds woes.

Under the cross-debarment agreement inked in 2010 (see below) firms excluded from tendering for World Bank contracts will, subject to some basic criteria being met, also be debarred from projects financed by the Asian Development Bank, the European Bank for Reconstruction and Development, Inter-American Development Bank and the African Development Bank.

What should construction companies with World Bank contracts do?

Construction firms would be well advised to implement risk-based anti-corruption policies and procedures across their organisations which accord with the requirements of the UK Bribery Act and US Foreign Corrupt Practices Act to ensure they mitigate their risk against corruption taking place within their organisations.

Alternatively, they could just cross their fingers and hope for the best.  But.  With the chances of being discovered, the risk of debarment by the World Bank, triggering a  domino effect of debarment among the other development banks and disclosure to relevant prosecutors compounded with reputational damage.  Is it *really* worth it?

Development Bank Cross Debarment Agreement –