The EIB Group – The EIB

1. The EIB and Fraud:How the EU Bank combats and prevents Fraud and CorruptionJan Willem van der Kaaij (EIB Inspector General)4th ICAC SymposiumHong Kong, 15-17 December 2009 European Investment Bank

2. The EIB Group – The EIB EIB – The EU Bank: • Providing long-term finance for projects promoting European objectives; • Supporting EU Development and Cooperation Policies in Partner Countries. • 2008 key figures: • Total Lending: EUR 57.6 bn - European Union: EUR 51.5 bn - Partner countries: EUR 6.1 bn • Borrowings: EUR 59.5 bn • Subscribed capital: EUR 232.4 bn (at 01/04/2009) European Investment Bank

3. EIB lending 1958-2008 European Investment Bank

4. The European Investment Bank (EIB)European priority objectives • Within the Union: • Cohesion and convergence • Small and medium-sized enterprises (SMEs) • Environmental sustainability • Knowledge Economy • Trans-European Networks (TENs) • Sustainable, competitive and secure energy European Investment Bank

5. The European Investment Bank (EIB)Europeanpriority objectives • Outside the Union: • Private sector development • Infrastructure development • Security of energy supply • Environmental sustainability • Support for EU presence in Asia and Latin America via Foreign Direct Investment (FDI) European Investment Bank

6. EIB Activities Outside the Union • Supporting EU Development and Cooperation Policies in Partner Countries • EIB external mandates: • Pre-accession countries: • Candidate countries - Croatia, Turkey and Former Yugoslav Republic of Macedonia • Potential candidate countries - Western Balkans • European neighbourhood: • Mediterranean Neighbourhood (FEMIP) • Eastern Europe, Southern Caucasus, Russia • Development: • Africa, Pacific and Caribbean (ACP) • South Africa • Asia and Latin America (ALA) • Loans of EUR 6.1bn in 2008 European Investment Bank

7. Asia and Latin America • EIB can lend up to EUR 3.8 bn during 2007-2013: • Support for EU presence in Asia and Latin America through Foreign Direct Investment and technology transfer • Environmental sustainability (climate change mitigation) • EU energy security • Loans of EUR 470 m in 2008 European Investment Bank

8. The Project Cycle at the EIB N.B.: Fraud/corruption can affect each phase of the project cycle. European Investment Bank

9. EIB Fraud Investigations (1) Investigations of allegations of the following in EIB-financed contracts (as well as Bank staff cases of internal fraud, if any): • fraud; • corruption; • collusion; and • coercion. • Key features: • independent in the exercise of its responsibilities; • work cooperatively with OLAF; • fair/impartial with due regard to rights of persons involved; • all information/documents kept strictly confidential; • right to examine/copy promoter/contractors’ books and records. N.B.: Investigations are administrative, fact–finding inquiries. European Investment Bank

10. EIB Fraud Investigations (2) • Standard Process: receipt, registration and evaluation of an allegation results in decision whether to open a case; • Sources of Information incl. documents, electronic data, site inspections/audits, and statements from witnesses; • Findings: based on both exculpatory (disprove) and inculpatory (prove) information; • Standard of Proof: “more probable than not”; • Obstruction of investigation: false statement or act to impede the investigation by staff member is sanctionable; • Case reports simultaneously to President and VPs, the Audit Committee and OLAF. European Investment Bank

11. EIB Fraud Investigations (3) European Investment Bank

12. EIB – OLAF Cooperation (1) OLAF and EIB: • Legal basis – ECJ decision in 2004 concerning access to EIB in “financial interests of the community”; • OLAF expertise : • investigation; • prosecution; • contact with countries’ judicial systems. • Working together: EIB banking expertise plus OLAF investigative/prosecution expertise; • Pooling of resources is more efficient. European Investment Bank

13. EIB – OLAF Cooperation (2) • Systematic & Routine: When complaints are received, two possibilities: • (1) Cases not valid  OLAF can review the list; • (2)Cases opened  OLAF informed by e-mail; Monthly reporting to OLAF at same time. • Cooperation: • Regular meetings (Brussels and Luxembourg); • OLAF can join any site visit and EIB joins OLAF missions; • EIB files and staff open to review by OLAF; • EIB staff can report suspicions directly to OLAF. European Investment Bank

14. EIB’s Anti-Fraud Policy (1) Anti-Fraud Policy approved by Board of Directors in 2008 is published on the EIB website. The Policy includes: • Harmonised IFI definitions of fraud, corruption, collusion and coercion (WB, AfDB, etc… signed the Uniform Framework Agreement in September 2006 in Singapore); • Money laundering & terrorist financing plus referral of suspicious transactions to local authorities. Also, EIB uses a bespoke version of harmonised IFI Investigation Procedures (also part of the Uniform Framework) – Now, all IFIs investigate the same things in same way. European Investment Bank

15. EIB’s Anti-Fraud Policy (2) In addition, EIB also: • updated its whistleblower protection; • is training all operations staff (and all newcomers) in fraud awareness / red flags; • is developing a sanction/debarment process; • will recruit additional staff - also to increase proactive capacity. European Investment Bank

16. Fraud Awareness/Red Flags We advise EIB staff and project officials to: - enforce the rules and controls; - use “professional scepticism” – if something looks odd, it probably is! - not rely on appearances – look behind the paperwork and beneath the surface (e.g. conduct random sampling); - assume corrupt parties know “the system”; - train staff to recognise red flags (officials living beyond their means, unusual unit prices, odd bidding patterns, sham firms winning contracts, etc…) and deal with fraud/corruption issues; - reward staff for reporting fraud or corruption by including governance issues in staff appreciation. European Investment Bank

17. Increasing deterrence (1) Deterrence: not only identifying the fraudster/briber, but also increasing the risk for him/her by: • regulatory/audit/financial follow-up; • criminal investigation/prosecution; • reputational risk, media coverage, etc…; • debarment. In particular, EIB will: • recover misapplied funds, suspend disbursements, and implement rectification measures. European Investment Bank

18. Increasing deterrence (2) As a key player in international financial community, EIB: • exchanges informationwith other IFIs and other parties; • raises awareness of fraud and corruption issues; • works with IFI’s to furtherharmonise approaches to key issues(disclosure of previous sanctions, agents fees etc.); • reviews/updates its policies & procedures to ensure they are robust and match ‘best practice’; • continues dialoguewith civil society, NGOs, contractors, etc… European Investment Bank

19. EIB’s Cooperation with National Authorities We are committed to cooperate and will: • Refer cases for investigation/prosecution to national authorities; • Assist with requests for information/documents and training; • Provide witnesses and/or evidence for criminal proceedings (subject to immunities and privileges); Cooperation is two-way - EIB expects: • Early notification of fraud or corruption issues affecting EIB-financed activities; and • Cooperation to assist EIB investigations. European Investment Bank

20. Contact Us Please do not hesitate to contact us at: EIB Investigations Division, 98-100 boulevard Konrad Adenauer, L-2950, Luxembourg (+352) 4379 84238 (+352) 4379 64000 j.vanderkaaij@eib.org devries@eib.org or investigations@eib.org and also http://www.eib.org/about/news/how-to-report-fraud-or-corruption.htm European Investment Bank

21. Thank you European Investment Bank