There's A New Sheriff In Town: Coverage For World Bank Investigations And Sanctions

 
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Led primarily by the U.S. DOJ and SEC, global anti-corruption efforts have escalated markedly over the past decade. The increased number of investigations and high-dollar penalties associated with FCPA have caught the attention of the both insurers and insureds, even leading some companies to purchase standalone liability policies that cover FCPA-like violations. But while a number of significant international treaties promoting the fight against corruption were enacted beginning in the mid-1990s, member states beyond the U.S. have been somewhat slow to join the enforcement brigade. UK prosecutors have shown some desire to bring cases under the UK Bribery Act, but thus far their efforts have not nearly approached those of prosecutors in the U.S. But in the past few years, a completely new player has emerged: the World Bank.

The World Bank (and other multi-lateral development banks) has its own anti-corruption enforcement authority and framework through which it investigates, prosecutes, tries, and sanctions private-sector companies for misconduct (i.e., fraud, corruption, collusion, coercion, and/or obstruction) in relation to Bank-financed projects. Whenever a company signs a Bank-financed contract, such as a government contract to perform work on a development project financed by World Bank funds, it submits to this jurisdiction.

The World Bank is now showing that it's not shy about exercising this authority. In fiscal year 2015 alone, the Integrity Vice Presidency ("INT"), the World Bank's investigatory arm, opened 323 preliminary inquiries pertaining to 86 countries; selected 99 of those inquiries for full investigation; and found sufficient evidence to conclude in 60 of those investigations that it was more likely than not that sanctionable misconduct had occurred. (Unlike in criminal proceedings in U.S. courts, the World Bank can impose sanctions merely upon a finding that it is "more likely than not" that sanctionable misconduct occurred.)

The World Bank's aggressive enforcement efforts will have serious implications for many companies engaged in development work and other work in the developing world. First, sanctions can include restitution and, more critically, temporary or permanent "debarment". Debarment not only makes a company ineligible to participate in future Bank-funded projects, it can extend to affiliates, successors and assigns, can result in either formal or informal "cross-debarment" by other development banks, and...

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