The African Development Bank Group: integrity compliance insight

The African Development Bank's (AfDB) Office of Integrity and Anti-Corruption (PIAC) is responsible for carrying out independent investigations into corruption and other sanctionable practices within the AfDB and AfDB-financed operations, and for developing preventive measure to mitigate the risk of such practices. PIAC's recent annual report for 2018 and 2019 (Report)¹ provides valuable insights into PIAC's activities, and highlights in particular the increase in PIAC's enforcement activity and the development of its ability to detect sanctionable practices.

Key takeaways:

• Companies who work on AfDB-financed projects should be aware of PIAC's activities, and the potential compliance risks they undertake when they engage in such projects.
• The increase in the AfDB's enforcement activity and its increasingly proactive approach to risk detection are indicative of similar trends with other multilateral banks (MDBs). Debarment and cross-debarment by the AfDB and other MDBs can have a severe impact on a company, and that impact can extend beyond just MDB-financed projects.
• Companies engaging in AfDB-financed projects should assess their integrity risks, and implement effective Integrity Compliance Programs (ICPs) that are tailored to their risk profiles and align with the MDB Integrity Compliance Guidelines.
• Companies bidding for AfDB-finance projects should be especially alert to the risk of submitting inaccurate information in their bids, and they should put in place internal processes to mitigate this risk. Such processes could include, for example, independent review of the bid by employees outside the team who prepared the bid, and a centralised and controlled database of information about previous experience.
• Companies subject to sanctions should not underestimate the time and resources that will be required to design and implement an effective ICP. In our experience, debarred companies can sometimes delay work on their ICPs. The AfDB, like other MDBs, will not be satisfied with a mere paper ICP, no matter how well designed. They will expect to be presented with well-structured evidence demonstrating that the ICP has been effectively implemented. Debarred companies should therefore expedite the development of their ICPs, so that they are well-positioned to seek release from debarment at the earliest opportunity (consistent with the conditions of debarment).

What does PIAC do?

PIAC became operational in 2006 and conducts its activities in line with the principles set out in the "Uniform Framework for Preventing and Combating Fraud and Corruption" of September 2006². This Framework was established by the Joint International Financial Institutions Anti-Corruption Task Force, which in turn was established by the AfDB, World Bank Group and other multilateral banks (MDBs) in order to develop a consistent approach to combatting corruption in the operations of member institutions. The Framework defines the specific behaviour that it is seeking to detect and prevent to include corruption, fraud, collusion and coercion (sanctionable practices).

PIAC is divided into teams reflecting the two aspects of its mandate. The Investigation Division (PIAC.2) conducts investigations into allegations of sanctionable practices involving either AfDB-financed projects or AfDB personnel. Where PIAC.2 finds evidence that an individual or company involved in an AfDB-financed project has engaged in sanctionable practices, the individual or company can be subject to sanctions. These include fixed-term debarments (from bidding for AfDB-financed projects), debarment with conditional release and conditional non-debarment. In certain cases, debarred persons are also "cross-debarred" by other MDBs.

The Integrity and Prevention Division (PIAC.1) is responsible for PIAC's preventative mandate, which involves the following activities:

• Integrity compliance monitoring: when a company is debarred or subject to conditional non-debarment, a typical condition for release from the sanction is the implementation of an effective ICP which accords with the AfDB's Integrity Compliance Guidelines. PIAC.1 assesses the implementation of the ICP, and may be assisted in this task by an Independent Integrity Compliance Consultant, who will review the ICP and provide recommendations for its development, reporting to the AfDB.
• Project Integrity Reviews (PIR): PIAC.1 conducts reviews of projects to identify risks and weaknesses that make the project prone to fraud and corruption, and provides recommendations on risk-mitigating measures. PIAC.1 began carrying out PIRs in 2017.
• Integrity Due Diligence (IDD) reviews: PIAC.1 conducts IDD reviews of non-sovereign entities seeking to do business with the AfDB and issues "opinions" to inform the Bank of any integrity issues and mitigating factors. In 2017, PIAC.1 issued 18 opinions, which increased in 2018 and 2019 to 31 and 43 opinions respectively.
• Training and awareness-raising.
• Mainstreaming integrity, anti-money laundering and other compliance issues into the AfDB's operations by developing policies and procedures.

Highlights from PIAC's report for 2018 and 2019

Increased enforcement activity

PIAC's investigation and enforcement activity has expanded in recent years. This is very much in line with the growth of the anti-corruption unit. In 2016 PIAC employed 20 people; PIAC‘s current head, Alan Bacarese (who will shortly be moving to take up the role of investigation director at the World Bank), was reported recently as projecting that the unit will soon comprise some 30 investigators, lawyers and forensic experts.

• In the period 2015 to 2019, there was an increase in both the number of cases which PIAC decided to investigate after an initial intake assessment – from 38 to 59 – and the number of completed investigations – from 19 to 60.
• In 2018, AfDB sanctioned 17 companies and 14 individuals, including the debarment of 5 companies and 3 individuals. This increased significantly in 2019, with sanctions being imposed on 32 companies and 9 individuals, including debarment of 24 companies and 3 individuals.
• The AfDB also cross-debarred 293 individuals and entities in 2018, and 234 in 2019, which represents a notable increase from 2017, when there were less than 200 cross-debarments.
• Investigations into the AfDB's own personnel have also increased. In 2018, 24 investigations were completed, and in 21% of those cases the allegations were substantiated. In 2019, this increased to 34 investigations, with allegations being substantiated in 32% of cases. Notably, allegations of staff misconduct increased 71% in 2019 compared to 2018.

A related area, and one that companies should be aware of, is the AfDB's co-operation with national anti-corruption agencies. PIAC has initiated negotiations with several such agencies in the AfDB's regional member countries, in order to formalise arrangements for information exchange and referral of cases, and to encourage Africa-based anti-corruption agencies to establish an information-sharing platform for anti-corruption investigations.

Fraud is the most common sanctionable practice

Fraud was by far the most common form of sanctionable practice in 2018 and 2019, representing 66% of completed investigations and 71% in 2019, carrying on a trend from 2017. This most often involved fraud committed in tender processes, such as misstatements of past experience and forged tender documents. The next most common sanctionable practice was corruption (23.4% of completed investigations in 2018 and 27% in 2019).

The completed investigations covered a range of different industrial sectors. In 2018, nearly half the cases related to either infrastructure or economics and governance. In 2019, energy and power, and water supply and sanitation, became more prominent. In geographical terms, the West Africa sub-region accounted for most investigated cases, with 45% and 33% in 2018 and 2019 respectively.

Integrity compliance

In 2018, PIAC.1 assessed whether 17 debarred companies and 14 debarred individuals had implemented the integrity reform conditions required for them to be released from debarment. Of these, only 1 company fully implemented an effective ICP and was released. In 2019, 15 companies and individuals had not taken any steps to meet the respective conditions; 1 company had begun to implement an ICP and 5 companies (and 7 individuals linked to them) were found to have complied and were released from debarment. As is the case with the other MDBs, the AfDB will commonly rely on the insight and expertise of Independent Integrity Compliance Consultants who will work with the sanctioned company and the AfDB and report on whether the standards of their integrity compliance guidelines have been met.

Proactive risk monitoring

The AfDB encourages whistleblowing from staff, consultants, contractors, members of civil society organisations and residents of its regional member countries, and these reports provide the basis for most of PIAC.2's investigations. However, the AfDB also seeks to proactively detect and monitor risks by other means. This includes PIRs, which increased to 5 in 2018 (although apparently none in 2019), and monitoring of media reports. In 2018-2019, the AfDB identified adverse media reports involving its activities in 6 regional member countries, which fed into investigations and other follow-up activity.

In addition, PIAC has been actively involved in developing new IT systems to facilitate proactive detection of risk. This includes a new Data Analytics Tool which is designed to proactively identify sanctionable practices by analysing AfDB procurement data and highlighting particular areas for PIAC to focus its work. It also includes a screening system for both on-boarding due diligence and ongoing monitoring of counterparties, clients, staff, consultants, suppliers and others persons, which screens against sanctions lists and adverse media reports.

Mayer Brown is experienced in advising on all aspects of MDB integrity compliance and enforcement. For further details of our capabilities in this area, please visit the Multilateral Development Banks - Integrity Compliance and Enforcement page of our website.