Senator Lugar Urges Reform at International Financial Institutions
Senator Lugar Commends Millenium Challenge Corporation for Actions on Nicaragua
On December 15, 2010, Senator Lugar wrote a letter to Millenium Challenge Corporation (MCC) CEO, Daniel Yohannes, commending the MCC for preivously terminating part of its funding for Nicaragua.
Senator Lugar urges International Development Banks to Step Up Corruption Cases
On December 7, 2010, Senator Lugar announced that criminal prosecution of firms and individuals caught defauding the World Bank and the other multilateral development banks is an important deterrent, but use of this tool varies widely among the banks. A review of the responses from the banks--the World Bank, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank--found that while all have stepped up efforts to ban corrupt firms, there was significant variation in how often the banks referred cases to national authorities.
Senator Lugar urges International Development Banks to Step Up Corruption Cases
On December 7, 2010, Senator Lugar announced that criminal prosecution of firms and individuals caught defauding the World Bank and the other multilateral development banks is an important deterrent, but use of this tool varies widely among the banks. A review of the responses from the banks--the World Bank, the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, and the Inter-American Development Bank--found that while all have stepped up efforts to ban corrupt firms, there was significant variation in how often the banks referred cases to national authorities.
Senator Lugar Urges Reform at International Financial Institutions
On March 10, 2010, the Senate Foreign Relations Committee Republican Staff prepared a report on needed reforms for the IMF and the multilateral development banks built on Senator Lugar’s years of oversight efforts. From Senator Lugar's letter of transmittal:
Seven years ago, I began an oversight project on the multilateral development banks, focused on ensuring that their financing reached the intended people and projects. I chaired six Senate Foreign Relations Committee hearings that included reviews of individual projects and policies of the respective development banks. I met with international financial institution leaders and my staff examined projects in many countries. The attached report provides fifty recommendations for eight different organizations to improve the accountability, transparency and effectiveness of the World Bank, the IMF and the other development banks. The American people must have confidence that our funds will be managed effectively, efficiently, and transparently. Given our domestic budget and employment situation, it is all the more critical that we ensure that our contributions successfully promote United States interests.
The United States and the G-20 are evaluating changes to the relative power countries wield at the international financial institutions while considering requesting billions in additional funds for the multilateral development banks this spring. This report suggests that contributions to the development banks should be a consequence of, not a precursor to, needed reforms given that financial flows to development countries are rebounding sharply from their 2009 lows.
On November 18, 2009, the Senate Foreign Relations Committee held a hearing on remaking the international economic architecture with Treasury Secretary Tim Geithner. Watch Senator Lugar's opening statement and questions for Secretary Geithner below.
In questions at the Senate Foreign Relations Committee hearing on the U.S. and G-20: Remaking the International Economic Architecture, Senator Lugar discussed with Treasury Secretary Tim Geithner that those responsible for requesting appropriations for the six international development banks need to do so in a timely manner, and that these requests be preceded by sufficient information to keep the committee up to date and improve inter-governmental relations in this area. Furthermore, he asked whether it is still necessary to have more international development banks if we are entering into a new era of international finance in which the geographical situation makes less sense to have these banks, how other nations view this issue, and what is the prognosis for the maintenance of all of these institutions. Watch the video below.
U.S. Senate Foreign Relations Committee Ranking Member Dick Lugar announced on July 10, 2007, that the World Bank and its sister institutions are stepping up their efforts to fight fraud and corruption. Senator Lugar, sponsor of a 2005 law to spur further anti-corruption steps by the World Bank and the other multilateral development banks (MDBs), made the announcement after reviewing progress reports he had requested from each of the MDB presidents.
- Senator Lugar's letter to the African Development Bank Group and the response
- Senator Lugar's letter to the Asian Development Bank and the response
- Senator Lugar's letter to the European Bank for Reconstruction and Development and the response
- Senator Lugar's letter to the Inter-American Development Bank and the response
- Senator Lugar's letter to the World Bank and the response
Senator Lugar began championing anti-corruption efforts in 2003, following allegations of fraud. As Chairman, he held six hearings to examine ways that the U.S. can contribute to anti-corruption and anti-fraud efforts at the multilateral development banks.
"While there are still additional measures that can be taken to ensure that development funds are not lost to fraud, particularly with regard to procurement, I am pleased that the development banks have made significant progress in fighting corruption," said Senator Lugar. In particular, he noted that most of the banks had improved their ability to investigate fraud and increased the number of anti-corruption projects, which experts who testified before the committee said were important measures to promote better governance and transparency.
The development banks formed an anti-corruption task force in September 2006 and began harmonizing their policies, as well as instituting new ones. This led to consistent definitions of corruption and fraud and resulted in the first cross debarment by the development banks.
Other measures taken by the MDBs include:
- The Board of Governors of the European Bank for Reconstruction and Development (EBRD) adopted two new codes of conduct, replacing codes adopted in 1991. The codes separately regulate conduct of the Bank staff, including senior management, as well as conduct of members of the Bank’s Board of Directors.
- Anti-money laundering and counter-terrorist financing special training courses have been initiated for all EBRD staff this year, plus the EBRD has taken the lead with an EU/Swiss funded initiative that provides hands-on practical training regarding anti-money laundering and counter-terrorist financing for more than 300 bankers from 17 countries.
- The Asian Development Bank (ADB) has amended its Public Communications Policy to allow the Integrity Division discretion to publicly disclose project procurement-related audit reports.
- The ADB adopted a Governance and Anticorruption Action Plan to improve ADB’s performance in the implementation of the governance and anticorruption policies.
- The African Development Bank (AfDB) approved a comprehensive Whistle-blowing and Complaints Handling Policy in January of this year.
- In late 2005, the AfDB established the Anti-Corruption and Fraud Investigation Division.
- The Board of the World Bank endorsed a Voluntary Disclosure Program in August 2006, that seeks private sector involvement in stemming corruption in Bank projects.
- The World Bank Board also endorsed a new sanctions regime “intended to ensure uniform compliance of highest ethical standards in all aspects of Bank-financed projects across the world, …including the adoption of new Anti-corruption Guidelines for projects, expansion in the definition of what constitutes corruption and the appointment of a new, expanded, Sanctions Board.”
- The Inter-American Development Bank (IADB) has implemented a new Code of Ethics and ethics training for all staff. A new financial disclosure form for staff has been implemented; a new Ethics Officer position established, and a new Ombudsman hired for the Bank.
- The IADB has created a new Sanctions Committee and adopted new sanctions procedures for determining when violations of the IADB’s anti-corruption policies have occurred.
Senator Lugar wrote to each of the development bank presidents asking them to detail their accomplishments. "Copies of the responses from the development bank presidents are being released so that the public can assess the reform measures for themselves," said Senator Lugar.
In addition to Committee hearings, Senator Lugar sent letters of inquiry regarding individual projects to the bank presidents. Committee staff continue interviewing NGO representatives, bank insiders, academics and others, and visit overseas problem projects.
Senator Lugar’s development bank reforms were signed into law by President Bush on November 14, 2005, as part of the FY06 Foreign Operations appropriations bill. The reforms, contained in Senator Lugar’s amendment, S.A. 1293, that passed the Senate by unanimous consent, apply to the World Bank, the African Development Bank, the Asian Bank, the Inter-American Bank, and the European Bank for Reconstruction and Development.
"These measures are an important step toward leveling the playing field so that honest companies and innocent individuals are not disadvantaged by the corrupt," Senator Lugar said. "When projects intended to boost economic development are derailed by corruption, the poorest suffer and are cheated of projected benefits in quality health care, clean water and education."
The mission of the development banks is to encourage economic development and reduce poverty.