In a recent roundtable as part of the World Bank Office of Suspension and Debarment’s Fifth International Debarment Colloquium, panelist Joseph Mauro (an Integrity Compliance Specialist with the Bank’s Integrity Vice Presidency (INT)) discussed efforts to move from a “stick” to a “carrot” approach with respect to corporate compliance programs.
Under the Bank’s current system, while implementation of a compliance program is a remedial measure for which mitigating credit may apply, individuals within the Integrity Compliance Office were rarely involved in reviewing a compliance program to any significant extent until after a company has already been sanctioned. Under this process, a company’s compliance program was typically reviewed in-depth only as a condition for release from sanction.
Mr. Mauro described a new initiative, which has been ongoing for the past 6-12 months, under which the Bank hopes to incentivize companies to adopt compliance programs prior to allegations of misconduct. Under the new system, the Integrity Compliance Office will work with INT investigators to perform a thorough compliance program analysis before a company is sanctioned to determine whether mitigation is warranted.
Although described as a “carrot” to encourage companies to develop compliance programs prior to a sanctions referral or settlement, the initiative raises several questions and could present additional risks for those involved in Bank-financed projects.
First, it is unclear the extent to which this initiative will benefit as opposed to harm respondents in the Bank’s sanctions process. Prior to this initiative, companies facing sanction could already request mitigation based on remedial measures taken (including implementation of an effective compliance program), and it is unclear the extent to which the proposal would increase the available mitigating credit for companies with a robust compliance program in place or simply ding companies for perceived gaps. The extent of INT’s involvement also remains unclear. Under the current system, INT has at times been reluctant to agree that mitigation credit is warranted even in instances where a compliance program has been put into place.
Second, it is unclear what stage in time a respondent’s compliance program will be assessed – at the time of misconduct, or at the time of investigation. Under the current sanctioning guidelines, efforts to improve a program in response to alleged misconduct are credited. A focus on implementing a robust program pre-investigation could potentially result in less credit for companies whose programs were substantial yet failed to identify the conduct at issue.
Third, it is unclear the extent to which a positive determination by the Integrity Compliance Office would affect conditions for release for sanction, and whether the Bank would be willing to consider more narrow conditions or conditions that do not require the imposition of a monitor or independent compliance expert.
Finally, while Mr. Mauro appeared to indicate that the Integrity Compliance Office has engaged with companies on their program in at least some instances, it is unclear whether this is a formal process. Absent meaningful dialogue with companies, the Bank’s assessment of a compliance program based only on policies and procedures is unlikely to accurately reflect the scope of implementation or effectiveness of that program.
While it is clear that the new initiative is intended to give compliance programs greater pre-sanction attention, it is less clear whether this focus will be a help or a hinderance to companies implementing programs in good faith who nonetheless find themselves subject to investigation and potential sanctions. And it falls short of what some have advocated—that the World Bank should require all contractors and consultants, as a condition of engaging in a Bank-financed project, to have adopted a program that meets specified standards.