Will the new EIB anti-fraud policy finally live up to its name?

How far is the EIB willing to go to avoid more corruption linked to its activities? After OLAF investigations in the Ibori and the Sostanj cases especially, this is the key question that will determine the success of EIB’s new anti fraud policy.

By Xavier Sol, Counter Balance director

Counter Balance, together with The Corner House, has been over the years accumulating evidence about misused EIB loans, such as in the Ibori case. EIB operations in Africa especially have been on our radar, as illustrated in a previous report and during an event held in the European Parliament. Accordingly, it is crucial that the bank reinforces its weak policy and strongly affirms its willingness to avoid dodgy investments – like through financial intermediaries – by adopting a risk-based approach.

The current EIB anti-fraud policy dates back to 2008, and since a lot of developments occurred in the past 5 years, the bank decided to review this key policy to be adopted by the EIB Board of Directors in April/May 2013. This is a move that we welcome in principle but of course to the condition that the loopholes that occurred are tackled adequately.

On Wednesday 20th March, the EIB held a workshop in Brussels on its revised Anti-fraud policy. This was for us and other CSOs the occasion to raise several major concerns in this regard. First, the EIB needs to stop loan disbursements to projects under ongoing national or European corruption investigations, such as in the case of Sostanj where the EIB disbursed the final tranche of its loan despite an ongoing OLAF investigation (Office Europeen de Lutte Anti-Fraude) taking place. On this question, the EIB answer remained vague, and it is still unclear how EIB administrative investigations are not hampering criminal investigations led by national or EU authorities.

Then, financial intermediaries (such as private equity funds and commercial banks) are not explicitly mentioned in the draft revised policy: this is worrying because EIB intermediated loans through those financial actors have a disastrous track record including a lack of accountability and clear pro-development approach, weak due diligence and a habit of tax avoidance. What is clearly missing in the bank’s approach is a strong position in the contracts it signs with this kind of intermediaries and commercial banks: the clauses negotiated there by the EIB are not stringent enough to make sure the contract will be suspended in case of fraud suspicion.

However, few improvements appear in the draft, including better protection of whistleblowers and informants, and the inclusion of an exclusion procedure based on the European Commission database of convicted companies. This would concretely enlarge the scope of companies or financial actors convicted of corruption being excluded from EIB loans’ beneficiaries.

It is also announced that the Bank, following the example of other International Financial Institutions, will also introduce an additional so-called “proactive integrity review” in addition to its traditional project screening. This seems to be an ambitious idea in order to regularly review some ongoing cases, but we wonder why such thorough review could not apply to all operations by default. This would be for the Bank a strong signal that it is engaging in the right direction. According to an EIB official, the review should apply to “risky and vulnerable projects” and cover “sensitive sectors, countries and Politically Exposed Persons”. This is clearly admitting that some EIB loans are risky and particularly jeopardized by corruptive practices. Why would then the Bank engage in those operations in the first place?

Overall, those recent developments show that pressure from civil society and OLAF in recent cases had some effects on the EIB positioning. Nevertheless, it is too early to judge the level of seriousness of the bank on those issues. Counter Balance will closely follow this review process and keep you informed about this policy. All potential attempts to prevent EU public investments to end up in corruption scandals should be made, and as such we expect from the European Investment Bank a clear and ambitious commitment to tackle such crucial issues.

Further readings:

  • On EIB’s anti-fraud policy EIB anti fraud policy (2008)
  • On the Ibori case
    • Background
    • “Was EU aid money used to finance Nigerian money laundering funds?”

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