OREANDA-NEWS. April 13, 2010. Taking a major step in the global fight against fraud and corruption, leading Multilateral Development Banks (MDBs) signed an agreement to cross debar firms and individuals found to have engaged in wrongdoing in MDB-financed development projects.

The new accord, which applies to debarments that exceed one year, includes: the African Development Bank Group, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank Group, and the World Bank Group.

Sanctions by MDBs typically include reprimand, conditions on future contracting, or debarment -declaring a company or individual ineligible to participate in any future activities it finances, either for a period of time or permanently.

Public debarment, which carries with it both financial and reputational risks, is considered a major deterrent to wrongdoing. Under the new agreement, entities debarred by one MDB may be sanctioned for the same misconduct by other participating development banks.

"With today's cross debarment agreement among development banks, a clear message on anticorruption is being delivered: Steal and cheat from one, get punished by all," said World Bank Group President Robert B. Zoellick.

"This action gives all our Banks a strong new tool to hold accountable firms that are engaging in fraudulent and corrupt practices in development projects, as well as a powerful incentive to companies to clean up their operations. The rules of the road have gotten tougher. This accord also underscores to our member governments that scarce development financing goes where it is intended."

"Unified action is critical to the success of our shared effort to fight corruption and to prevent it from undermining development effectiveness," said Luis Alberto Moreno, President of the Inter-American Development Bank.

"Cross-sanctioning, combined with greater information sharing and coordinated investigations, should allow our institutions to more robustly prevent, detect, and deter corruption," he added.

MDBs participating in the agreement will continue to manage their independent strategies to deter and prevent fraud and corruption in projects. However, the new agreement offers an opportunity to deepen the cooperation between participating MDBs on fraud and corruption risk management.

"This enhanced cooperation among the Multilateral Development Banks is taking the fight against fraud and corruption to a new level. Dealing resolutely with corruption is key to the development of sustainable economies that will attract investment and engender confidence. This is a very important step," said Thomas Mirow, the President of the European Bank for Reconstruction and Development.

Stepping up deterrent action is critical to the success of global efforts to fight corruption and to prevent it from undermining development effectiveness.

"A unified and coordinated approach to combating fraud and corruption will help the support provided by the multilateral development banks around the world to reach its intended beneficiaries. This will maximize the development effectiveness of our collective efforts to alleviate poverty and ensure sustainable economic growth," said Haruhiko Kuroda, President of the Asian Development Bank.

This collective enforcement action validates the institutions' 17 September 2006 commitment as part of the International Financial Institutions Anti-Corruption Task Force. The 2006 accord committed MDBs to further explore how compliance and enforcement actions taken by one institution could be mutually recognized.

Under the 2006 agreement, the institutions agreed to harmonize their definitions of sanctionable practices and to share greater investigative information among the Banks. Cross debarment combined with greater information sharing and coordinated investigations, should allow the institutions to more robustly prevent, detect, and deter corruption. A strong, symmetrical, and coordinated approach can also show partner governments and private sector firms that each institution is maintaining the same high standards.

"The shared and cooperation efforts that will be brought about by this new agreement will ensure development effectiveness through sanctioning entities and individuals found to have engaged in fraud and corruption from benefitting from resources meant for development and poverty alleviation. It will ensure further that the deterrence efforts targeting both the supply and demand side of corruption are effective," said African Development Bank President, Dr. Donald Kaberuka.

The European Investment bank, hosting the signing event, praised the agreement. "The EIB is committed to the fight against corruption and welcomes the cross debarment agreement signed today by the other MDBs. As the bank of the European Union, the EIB will examine how to join while respecting the EU legal framework in which it operates. In the meantime, the EIB will endeavour in its own debarment policy to take fully into account the decisions taken by the other MDBs," said European Investment Bank President, Philippe Maystadt.