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17/12/2009 1European Investment Bank

The EIB and Fraud:How the EU Bank combats and prevents

Fraud and Corruption

Jan Willem van der Kaaij (EIB Inspector General)

4th ICAC SymposiumHong Kong, 15-17 December 2009


The EIB Group – The EIB

EIB – The EU Bank:

Providing long-term finance for projects promoting European objectives;

Supporting EU Development and Cooperation Policies in Partner Countries.

2008 key figures:

Total Lending: EUR 57.6 bn- European Union: EUR 51.5 bn- Partner countries: EUR 6.1 bn

Borrowings: EUR 59.5 bnSubscribed capital: EUR 232.4 bn(at 01/04/2009)


EIB lending 1958-2008


The European Investment Bank (EIB)European priority objectives

Within the Union:Cohesion and convergence

Small and medium-sized enterprises (SMEs)

Environmental sustainability

Knowledge Economy

Trans-European Networks (TENs)

Sustainable, competitive and secure energy


The European Investment Bank (EIB)European priority objectives

Outside the Union:Private sector development

Infrastructure development

Security of energy supply

Environmental sustainability

Support for EU presence in Asia and Latin America via Foreign Direct Investment (FDI)


EIB Activities Outside the Union

Supporting EU Development and Cooperation Policies in Partner Countries EIB external mandates:

Pre-accession countries:Candidate countries - Croatia, Turkey and Former Yugoslav Republic of MacedoniaPotential candidate countries - Western Balkans

European neighbourhood:Mediterranean Neighbourhood (FEMIP)Eastern Europe, Southern Caucasus, Russia

Development: Africa, Pacific and Caribbean (ACP)South AfricaAsia and Latin America (ALA)

Loans of EUR 6.1bn in 2008


Asia and Latin America

EIB can lend up to EUR 3.8 bn during 2007-2013:

Support for EU presence in Asia and Latin America through Foreign Direct Investment and technology transfer

Environmental sustainability (climate change mitigation)

EU energy security

Loans of EUR 470 m in 2008


The Project Cycle at the EIB

N.B.: Fraud/corruption can affect each phase of the project cycle.


EIB Fraud Investigations (1)Investigations of allegations of the following in EIB-financed contracts (as well as Bank staff cases of internal fraud, if any):

fraud; corruption; collusion; and coercion.

Key features: independent in the exercise of its responsibilities; work cooperatively with OLAF; fair/impartial with due regard to rights of persons involved; all information/documents kept strictly confidential; right to examine/copy promoter/contractors’ books and records.

N.B.: Investigations are administrative, fact–finding inquiries.


EIB Fraud Investigations (2)

Standard Process: receipt, registration and evaluation of an allegation results in decision whether to open a case;

Sources of Information incl. documents, electronic data, site inspections/audits, and statements from witnesses;

Findings: based on both exculpatory (disprove) and inculpatory (prove) information;

Standard of Proof: “more probable than not”;

Obstruction of investigation: false statement or act to impede the investigation by staff member is sanctionable;

Case reports simultaneously to President and VPs, the Audit Committee and OLAF.


EIB Fraud Investigations (3)

2006 2007 2008 3rd Q 2009

Total complaints received 44 24 38 41

Cases reviewed without basis 21 3 17 27

New investigations opened 23 21 21 14

On-going investigations from previous years

16 19 24 23

Total investigations worked on 39 40 45 37

Investigations closed 20 16 18 5

Investigations open year end 19 24 27 32

Field missions 7 7 8 7

(of which with OLAF) 5 3 5 5

Cases leading to prosecution - reimbursement

3 2 4 5


EIB – OLAF Cooperation (1)

OLAF and EIB:

Legal basis – ECJ decision in 2004 concerning access to EIB in “financial interests of the community”;

OLAF expertise : investigation;prosecution;contact with countries’ judicial systems.

Working together: EIB banking expertise plus OLAF investigative/prosecution expertise;

Pooling of resources is more efficient.


EIB – OLAF Cooperation (2)

Systematic & Routine: When complaints are received, two possibilities:

(1) Cases not valid OLAF can review the list;

(2) Cases opened OLAF informed by e-mail;

Monthly reporting to OLAF at same time.

Cooperation:

Regular meetings (Brussels and Luxembourg);

OLAF can join any site visit and EIB joins OLAF missions;

EIB files and staff open to review by OLAF;

EIB staff can report suspicions directly to OLAF.


EIB’s Anti-Fraud Policy (1)

Anti-Fraud Policy approved by Board of Directors in 2008 is published on the EIB website.

The Policy includes:

Harmonised IFI definitions of fraud, corruption, collusion and coercion (WB, AfDB, etc… signed the Uniform Framework Agreement in September 2006 in Singapore);

Money laundering & terrorist financing plus referral of suspicious transactions to local authorities.

Also, EIB uses a bespoke version of harmonised IFI Investigation Procedures (also part of the Uniform Framework) – Now, all IFIs investigate the same things in same way.


EIB’s Anti-Fraud Policy (2)

In addition, EIB also:

updated its whistleblower protection;

is training all operations staff (and all newcomers) in fraud awareness / red flags;

is developing a sanction/debarment process;

will recruit additional staff - also to increase proactive capacity.


Fraud Awareness/Red Flags

We advise EIB staff and project officials to:

- enforce the rules and controls;

- use “professional scepticism” – if something looks odd, it

probably is!

- not rely on appearances – look behind the paperwork and beneath the surface (e.g. conduct random sampling);

- assume corrupt parties know “the system”;

- train staff to recognise red flags (officials living beyond their means, unusual unit prices, odd bidding

patterns, sham firms winning contracts, etc…) and deal with fraud/corruption issues;

- reward staff for reporting fraud or corruption by including governance issues in staff appreciation.


Increasing deterrence (1)

Deterrence: not only identifying the fraudster/briber, but alsoincreasing the risk for him/her by:

regulatory/audit/financial follow-up; criminal investigation/prosecution; reputational risk, media coverage, etc…; debarment.

In particular, EIB will:

recover misapplied funds, suspend disbursements, and implement rectification measures.


Increasing deterrence (2)

As a key player in international financial community, EIB:

exchanges information with other IFIs and other parties;

raises awareness of fraud and corruption issues;

works with IFI’s to further harmonise approaches to key issues (disclosure of previous sanctions, agents fees etc.);

reviews/updates its policies & procedures to ensure they are robust and match ‘best practice’;

continues dialogue with civil society, NGOs, contractors, etc…


EIB’s Cooperation with National Authorities

We are committed to cooperate and will:

Refer cases for investigation/prosecution to national authorities; Assist with requests for information/documents and training; Provide witnesses and/or evidence for criminal proceedings

(subject to immunities and privileges);

Cooperation is two-way - EIB expects:

Early notification of fraud or corruption issues affecting EIB-financed activities; and

Cooperation to assist EIB investigations.


Contact Us

Please do not hesitate to contact us at:

EIB Investigations Division,

98-100 boulevard Konrad Adenauer,

L-2950, Luxembourg

(+352) 4379 84238 (+352) 4379 64000

[email protected]

[email protected]

or

[email protected]

and also http://www.eib.org/about/news/how-to-report-fraud-or-corruption.htm

mailto:[email protected]



http://www.eib.org/about/news/how-to-report-fraud-or-corruption.htm


Thank you

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