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On March 21, 2014, the African Development Bank’s Integrity and Anti-Corruption Department (IACD) announced the conclusion of settlement agreements with three multinationals following the companies’ admission of corrupt practices in a Bank-financed project. As part of the settlement agreements, IACD imposed financial penalties totaling US $17 million.
Bank in Action*: First of all, congratulations for the recent conclusion of the settlement.
Anna Bossman: Thank you. The settlement concluded in March by IACD that includes the payment of a fine in the amount of US $17 million and a three-year debarment of three companies is a great success for the Department. With the exception of the resolution of allegations of corrupt practices between the World Bank and Siemens, this is the largest financial penalty ever imposed by any MDB. It is unfortunately still very uncommon for stolen assets to be returned to the countries directly harmed by corrupt practices. In cases of foreign corrupt practices, only about US $200 million of approximately US $6 billion in monetary sanctions imposed on companies found to have engaged in bribing foreign public officials have ever been returned to the regions whose public officials have accepted the bribes. By re-investing monetary penalties in programs supporting anti-corruption programs, the Bank could contribute to redressing this situation in line with its strategic focus on Good Governance.
Bank in Action: What will the US $17 million in financial penalties be used for?
Anna Bossman: The Sanctions Procedures tie the imposition of fines to stringent conditions: The collected monetary penalties can only be used to finance programs aimed at fighting corruption in Regional Member Countries. Clearly, the Bank must avoid any perception that it is financially benefitting from wrongdoing that occurred in its own projects. Such an impression would be extremely damaging to the Bank’s reputation. In order to prevent any moral hazard and ethical dilemmas, both the World Bank and the European Investment Bank in similar situations have opted to keep funds deriving from financial penalties strictly separate from their administrative budget or from funds dedicated to operations in the normal course of business.
Bank in Action: What exactly is a settlement?
Anna Bossman: Settlements are part of today’s legal toolkit available to both national law enforcement and the Integrity Departments of all MDB’s to conclude cases of corrupt practices or other wrongdoing short of a full sanctioning process. The Resolution by the Board of Directors on the implementation of an independent sanctions process within the Bank adopted in July 2012 formally provides IACD with the authority to resolve cases through settlement in order to facilitate investigations and the sanction process. To be very clear, this does not mean that IACD is allowed absolute discretion: the agreement between the Bank and a respondent must be fair, proportionate, credible, and transparent and must be cleared by the Bank’s General Counsel as well as the independent Sanctions Commissioner.
Bank in Action: What are some of the advantages and disadvantages of settlements?
Anna Bossman: Settlements are a pragmatic solution to a growing case load and a marked increase in the acceptance of unethical business practices among private sector players. Settlements allow for an efficient use of very limited investigative resources to process comparatively more cases, particularly highly complex financial investigations involving multiple respondents in various jurisdictions using sophisticated means. Yes, it is, to a certain extent, a trade-off; settlements frequently go hand-in-hand with limited concessions in sanctioning. However, we also have to be realistic with respect to the investment any institution is able to make on any given case. That said, if global enforcement actions for corrupt practices have risen sharply in the last decade, it is largely due to the use of settlements in an increasing number of countries.
Bank in Action: Do settlements always entail financial penalties?
Anna Bossman: No, the sanction that is agreed upon between the Bank and the respondent will not necessarily include a financial component. The settlement agreement may cover a certain debarment period, the implementation of a compliance program to prevent sanctionable practices going forward, cooperation with IACD on separate investigations, payment of restitution to the country whose project was affected, etc. We need to consider the specific individual circumstances of each and every case. What is absolutely non-negotiable is the respondent’s full admission of the facts that constitute the offense and the acceptance of guilt.
Bank in Action: Thank you, Ms. Bossman, for this interview.
Anna Bossman: My pleasure.
*Bank in Action is an AfDB electronic publication.