IFC Participation in IFI Harmonization on Fraud & Corruption Alpita Shah IFC Legal Department October 2009
IFI Harmonized Definitions • Included in Contractual Language • Corrupt Practices • Fraudulent Practices • Coercive Practices • Collusive Practices • Obstructive Practices • IFC Interpretative Guidelines
Definitions of Sanctionable Practices – IFC Operations Old Definition: Prohibited Practices • "Prohibited Payments“ - any offer, gift, payment, promise to pay or authorization of the payment of any money or anything of value, directly or indirectly, to or for the use or benefit of any Official (including to or for the use or benefit of any other Person if the Borrower [or Sponsor] knows, or has reasonable grounds for believing, that the other Person would use such offer, gift, payment, promise or authorization of payment for the benefit of any such Official), for the purpose of influencing any act or decision or omission of any Official in order to obtain, retain or direct business to, or to secure any improper benefit or advantage for, the Borrower, its Affiliates or any other Person; provided that any such offer, gift, payment, promise or authorization of payment shall not be considered a Prohibited Payment if, in IFC's reasonable opinion, it (i) is lawful under applicable written laws and regulations or (ii) is made for the purpose of expediting or securing the performance of a routine governmental action (as such term is construed under applicable law);
Harmonized Definitions of Sanctionable Practices Corrupt Practices • A “Corrupt Practice” is the offering, giving, receiving or soliciting, directly or indirectly, of anything of value to influence improperly the actions of another party.
Harmonized Definitions of Sanctionable Practices Corrupt Practices: Interpretation • Kickbacks and bribery • Interpretation relating to facilitation payments will take into account relevant law and international conventions pertaining to corruption • Does not include • Antitrust, securities violations • Charitable/social development contributions • Customary corporate hospitality • Reasonable travel and entertainment expenses paid for public officials consistent with existing practice under relevant law/int’l conventions
Harmonized Definitions of Sanctionable Practices Fraudulent Practices • A “Fraudulent Practice” is any action or omission, including misrepresentation, that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation.
Harmonized Definitions of Sanctionable Practices Fraudulent Practices: Interpretation • Mere inaccuracy is not fraud • Covers practice directed to or against a World Bank Group entity • Does not cover frauds on other third parties or other illegal behavior
Harmonized Definitions of Sanctionable Practices Coercive Practices • A “Coercive Practice” is impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party.
Harmonized Definitions of Sanctionable Practices • Coercive Practices: Interpretation • Threatened or actual illegal actions undertaken for purpose of bid rigging • Could be interpreted more broadly but clarified in IFC Interpretive Guidelines
Harmonized Definitions of Sanctionable Practices Collusive Practices • A “Collusive Practice” is an arrangement between two or more parties designed to achieve an improper purpose, including to influence improperly the actions of another party.
Harmonized Definitions of Sanctionable Practices • Collusive Practices: Interpretation • Actions undertaken for the purpose of bid rigging
Definition of Obstructive Practices Obstructive Practices • An "Obstructive Practice" is • (i) deliberately destroying, falsifying, altering or concealing of evidence material to the investigation or making of false statements to investigators, in order to materially impede a World Bank Group investigation into allegations of a corrupt, fraudulent, coercive or collusive practice, and/or threatening, harassing or intimidating any party to prevent it from disclosing its knowledge of matters relevant to the investigation or from pursuing the investigation, or (ii) acts intended to materially impede the exercise of IFC’s access to contractually required information in connection with a World Bank Group investigation into allegations of a corrupt, fraudulent, coercive or collusive practice.
Obstructive Practices: Interpretation • Any action legally or otherwise properly taken by a party to maintain or preserve its regulatory, legal or constitutional rights such as the attorney-client privilege, regardless of whether such action had the effect of impeding an investigation, does not constitute an Obstructive Practice • The only definition not agreed upon by the other IFIs at this time