Corruption and Fraud in International Projects

BASIC COUNTERMEASURES AND CONTROLS

Countermeasures that can be employed by contractors that are susceptible to bribe demands include:

• Develop corporate ethics programs for employees
• Adopt strict policies controlling gifts, entertainment and travel expenses; carefully scrutinize such requests
• Conduct a thorough due diligence inquiry on prospective agents, consultants and subcontractors;
• Adopt a "Know your Business Partner" policy, and train employees to recognize and look for the red flags of corruption
• Require close scrutiny and upper-level approval of local agent, consulting or supply contracts signed in the field
• Include business integrity and broad audit clauses in all local contracts, subcontracts and consulting agreements
• Thoroughly inspect and test all goods and works received from suppliers
• Report suspected corruption, bid rigging or fraud to the organization financing the project

Countermeasures that can be employed by host government agencies and lenders include:

• Establish independent fraud and corruption investigation units
• Install and publicize confidential hotlines and other confidential reporting systems
• Establish contractor compliance and voluntary disclosure programs
• Require contractors and subcontractors to disclose all fees and commissions
• Publicize contracting and payment information, audit and investigation results on the internet and elsewhere
• Use independent inspectors to closely test and inspect goods, services and works received;
• Require annual financial disclosure by all project and government officials involved in procurement or other high-risk corruption areas, such as award of licenses, permits or inspections
• Include anti-corruption warranties, business integrity and audit clauses in all contracts, subcontracts and large purchase orders. Audit clause inspection rights should extend to financial records to reach evidence of bribes, and be effective for at least five years after the contract closes

top of page