EBRD’s Prohibited Practice Actions

Rohan Schaap

Office of the Chief Compliance Officer

24 May 2017

Chernobyl New Safe Confinement

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What do we expect from our clients?

EBRD expects its Public Sector Clients to have:

Comprehensive internal controls that are designed to

detect and limit the opportunities for fraud and

corruption.

Reporting mechanism that allows internal and external

parties to report suspicions of fraud and corruption, and

to do so without fear of retaliation (whistle-blower

protection).

A process for effectively reviewing and resolving

complaints of fraud and corruption.

Essential Elements of an Anti-

Corruption Compliance Programme

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What exists on paper? How comprehensive?

• Anti-bribery/corruption policy

• Prohibition on bribery

• Rules on gifts and hospitality, political donations, charitable donations, bribery solicitation

• Code of Conduct/Ethics

• AML/CFT and sanctions compliance policy

• Whistleblowing/Reporting mechanism

Meaningful implementation?

• Ownership/tone from the top and middle management

• Training and awareness/raising

• Repeat risk assessments

• Response to compliance failures/internal investigations

• Financial and non-financial control measures

• Monitoring and review

What does the EBRD do to help reduce

the demand side corruption?

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Ukrainian Business Ombudsman Council

Extra-judicial dispute resolution mechanism

MOU between Govt of Ukraine, EBRD, etc.

Legislatively enshrined

Engagement with govt authorities

Technical capacity building

Raising awareness of business integrity

“Appropriate” enforcement /sanction

Identifying demand side situations

Business integrity and controls improvements

EBRD Investigations of Prohibited

Practices

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• Investigates allegations of Prohibited Practices committed in respect of

Bank Projects.

• There are seven Prohibited Practices:

• Fraud

• Corruption

• Collusion

• Coercion

• Theft

• Misuse of Bank resources

• Obstruction

• Prohibited Practices can result in debarment of the relevant entities, and

then(potentially) cross-debarment by other MDBs.

Our Expectations (during an

investigation)

EBRD expects its client to:

Inform us of all suspicions of fraud and corruption

occurring within project at the earliest possible time.

Fully cooperate with EBRD’s investigations, including

making its records and personnel available to

investigators;

Suspend (and if appropriate, dismiss) all individuals

suspected of being involved;

Review internal controls and make improvements where

required.

What will an EBRD investigation

involve?

On receipt of an allegation, EBRD will:

Assess the reliability and seriousness of the

allegation;

Assess the implications of the allegation on the EBRD

programme / EBRD procurement activity;

On the basis of the above, determine whether to

commence an EBRD investigation into the

allegations.

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EBRD Investigations

An EBRD investigation:

• Will seek to determine whether tenderers or contractors

/ subcontractors have engaged in fraud and corruption.

• Will not investigate the actions of a public sector client or

its personnel (including personnel from the Project

Implementation Unit). This is the role for national

authorities and / or the client;

• May result in EBRD imposing sanctions on an entity that

is involved in fraud or corruption and / or deciding not to

fund the affected project.

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Focus Country – Ukraine

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Four corruption-related enforcement actions 2015-2016

# Subject Payments Benefit Result

1

ACTI Ukraine

(Subsidiary of multinational

agribusiness corporation)

US$22

million

US$100 million in

VAT refunds

3-year

debarment

2Medium-sized, family-

owned plastic manufacturer€7.2 million

VAT refunds,

customs clearance,

court case facilitation

3-year

conditional

nondebarment

3Medium-sized, family-

owned steel manufacturer€4.3 million

€18.3 million in VAT

refunds

3-year

conditional

nondebarment

4Medium-sized, regional

grain trading companyUS$380,000 Land registration

3-year

conditional

nondebarment

Useful Resources

26 May, 2017 11

• Transparency International Business

Principles for Countering Bribery

• ISO 37001 on Anti-Bribery

Management Systems

• UNODC/World Bank/OECD Anti-

Corruption Ethics and Compliance

Handbook for Business

• UN Global Compact: A Guide for Anti-

Corruption Risk Assessment

• U.S. DOJ Evaluation of Corporate

Compliance Programs

• Business Anti-Corruption Portal

• World Economic Forum Partnering

Against Corruption Initiative

Questions?

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EBRD Website: www.ebrd.com

List of Ineligible Entities: www.ebrd.com/ineligible-entities.html

Report Fraud and Corruption: http://www.ebrd.com/eform/contact/1390580844264

Ombudsman Business Council: https://boi.org.ua/en/