By Arturo Herrera Gutierrez and Jean Pesme
Corruption has a disproportionate impact on the world’s most poor and vulnerable, increasing costs and reducing access to basic services. It erodes trust in governments and is a driver of conflict and fragility. It enables environmental and safety controls to be bypassed, contributing to pollution, environmental damage, and sub-par infrastructure. Corruption also affects private sector trust and investor confidence. And it reduces local revenue collection through tax erosion, depriving governments of resources for funding public goods.
This is why fighting corruption is vital to closing the financing gap, and a key priority of the World Bank’s mission to end extreme poverty and promote shared prosperity on a livable planet. We are strengthening our approach to better address the illicit financial flows generated by corruption, including through our support to clients to help them control corruption, engagement with international partners and global policy initiatives, and through robust mechanisms that protect the integrity of our financed activities.
While there has been progress in controlling corruption, it has been slow and uneven, and corrupt practices continue to evolve. This corruption can take many forms, from “greasing the wheels” petty bribery and trading in influence and nepotism to large-scale embezzlement of public resources and state capture by those pulling the levers of power at the highest levels of government. The corrupt conceal and move their illicit gains through opaque corporate entities in other countries and investing in foreign luxury assets like real estate. This requires help from banks, lawyers or other professionals, the “enablers.”
So, while country-level initiatives to improve the prevention and detection of corruption are critical, these must be complemented with efforts to also address the transnational dimensions. The World Bank’s work has evolved to address this growing complexity of corruption, including to take on its transnational dimensions and better tailor our work to different contexts. We are also adopting a more integrative approach to strengthen our focus on results and outcomes, mobilizing new knowledge, data, tools, and partnerships, and linking our work to key areas that are prone to corruption.
In particular, here are our four main approaches to this work:
Data and technology. Harnessing technology and data can generate evidence to guide anti-corruption reform efforts and help make these reforms more sustainable when used by formal institutions and civil society. It can also help strengthen and automate controls, introduce risk-based approaches to audits, and enhance the transparency of expenditures, procurement, and service delivery. Risk-based data platforms can help oversight institutions target their investigative resources more effectively and civil society observatories engage citizens in both monitoring and demanding greater accountability in public procurement.
For instance, artificial intelligence tools are being piloted to automate the prioritization of audits by tax authorities in Georgia, where the revenue services identified potential tax evaders with a 63 percent accuracy rate. A Governance Risk Assessment System (GRAS), piloted at three levels of government in Brazil, can identify around 200 red flags of potential fraud in public expenditures.
Reducing corruption in public procurement and contract management. The impacts of corruption in procurement go beyond costs, quality, and value for money. The World Bank is supporting governments in adopting and strengthening electronic procurement systems and using procurement data to improve the value for money and integrity of public spending. Reducing collusion, contract steering, and other forms of corruption in procurement decreases capture by politically connected firms, creating more inclusive markets and opportunities for small businesses.
Strengthening accountability institutions. Government integrity and accountability are supported through a variety of measures and institutions. Solutions need to be tailored to the local context and the corruption risks present there. New uses of data and technology, stronger anti-money laundering tools, and financial integrity policies are helping to ensure that mechanisms such as income and asset declarations for public officials, whistleblower protections, and conflict-of-interest management are being effectively implemented. Thanks to risk-based audits, supreme audit institutions are taking on a larger role. There are exciting developments in analyzing procurement data (ProAct) that support all of these goals.
Beneficial ownership transparency and countering illicit financial flows. As money is a key motivation for grand corruption, it’s important to address institutional vulnerabilities that enable these practices and to follow the funds after corrupt acts have been committed. This requires transparent beneficial ownership regimes to prevent and lay bare the complex ways in which the powerful use corporate entities, such as shell companies and trusts, to rig bids, embezzle government funds, and hold their stolen wealth offshore. It also requires stronger regulation of the “enablers,” and an expert enforcement apparatus that can trace funds across borders and engage in international cooperation.
The World Bank’s Financial Stability and Integrity unit, for example, assists countries in assessing their national money laundering risks and puts in place robust anti-money laundering systems. The Stolen Asset Recovery initiative (StAR), a joint initiative of the World Bank and the United Nations Office on Drugs and Crime (UNODC), facilitates the return of proceeds from corruption to affected countries.
Achieving long-term economic growth and shared prosperity requires us to work together with partners in governments, international organizations, the private sector, academia, and civil society to address corruption and its corrosive impacts. This is why we launched the Anticorruption for Development Global Partnership, which includes 250 partners dedicated to fighting corruption. We are also contributing to the Financial Action Task Force’s (FATF) global standards on beneficial ownership transparency, conducting evaluations, and supporting countries’ implementation of solutions.
FATF, an intergovernmental body, leads global action to combat money laundering and terror finance. Together with UNODC and the Organization for Economic Co-operation and Development, on behalf of the G20 Anticorruption Working Group under the Brazilian Presidency, the World Bank is recommending actions against corruption that apply to G20 countries and beyond.
It will take vast financing to address challenges linked to climate, health, fragility and other major development issues. We must deploy all the tools available to counter the effects of corruption in diverting much-needed resources and undermining development outcomes, and unleash the positive dividends of building trust, mobilizing resources for development, and safeguarding the integrity of public investments.
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