Know your contractors: transparent ownership reduces corruption

World Bank headquarters, Washington DC.

Procurement is at the heart of the work that the World Bank and other international development banks do. Countries borrow from these multilateral organisations to develop the public works and services their citizens need: such as healthcare, education, sanitation and infrastructure.

Through public procurement, countries use the borrowed funds to acquire expertise, labour and supplies needed for these projects. And public procurement is an area that we know is fraught with corruption risk.

That’s why Transparency International USA organised a panel as part of the World Bank Civil Society Policy Forum, held in Washington in conjunction with the World Bank/International Monetary Fund spring meetings, focusing on transparency and accountability in public procurement. Our aim was to demonstrate how anonymous shell companies are often used to facilitate corruption in public procurement.

Public procurement typically accounts for the largest share of government expenditures aside from public sector salaries and social benefits. It’s generally between 15 and 30 per cent of a country’s gross domestic product.

Conflicts of interest are a huge issue in public procurement. Too often, public contracts are awarded to family members or associates of the government officials overseeing them. By using anonymous shell companies, connected bidders are able to conceal their links to government officials.

These anonymous shell companies are set up by a network of bankers, lawyers, and accountants all over the world, and may be incorporated in both onshore and offshore jurisdictions. For example, the state of Delaware in the US has become a popular location for anonymous shell companies. Many small island nations such as the British Virgin Islands, the Cayman Islands and the Seychelles are frequently used for this purpose too.

Transparency International believes that transparency and accountability are essential to preventing corruption and fraud in public procurement. The World Bank plays an enormous role in international development worldwide.

It is important that the bank also plays a leading role in adopting best practice procurement policies, not only because of the billions of dollars of procurements it oversees, but because other international financial institutions and governments have traditionally adopted World Bank policies on a wide variety of subjects. This means that it should insist that ultimate beneficial ownership information of all corporate bidders is collected and disclosed for all World Bank-funded procurements.

There is a growing international consensus among policy experts, civil society and governments that public beneficial ownership registries are a critical element in the fight against corruption fuelled by anonymous shell companies.

The UK, Denmark and the European Union have all either taken action or pledged to take action on the creation of beneficial ownership registries.

The G20 countries have also committed to increase transparency of legal entities by endorsing the High Level Principles of Beneficial Ownership Transparency. The World Bank should add its voice to this growing chorus. By doing so, it can simultaneously strike a blow in the fight against corruption, set an example for countries around the world, and protect its own interests in ensuring that its funds benefit those its projects are aimed at helping. It is time for the World Bank to act.

Co-written by Shruti Shah, Vice President of Transparency International USA.

Carousel image: Flickr, John Connell

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Daniel Dudis

About Daniel Dudis

Daniel Dudis is Senior Policy Director at Transparency International USA.

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8 Responses to Know your contractors: transparent ownership reduces corruption

  1. Wayne Smith 11 May 2015 at 10:21 pm #

    Me and a friend were just talking about how our government in Canada charges us a lot for medical and employment insurance when are tax rates are already high.Also is very hard to get employment insurance if you need it, sounds corrupt by whoever handles that.

  2. Er. Harshwinder Singh 13 June 2015 at 7:35 pm #

    1. Comments of Large Nos. of honest peoples* for World Bank, for Water Resources Investigation Division, Punjab as well as for me [contractors of World Bank funded MGWOW projects under HP – 2 in 2008]:-

    Comments; Poor technical knowledge* of concerned authorities (towards Tubewell’s Projects) of World Bank [who gave/ released the Funds of Crore Rupees to W.R.I.D Chandigarh on the name of MGWOW projects under HP – 2 in 2008 & …] and Breach commissioning of W.R.I.D, Punjab, is not only responsible for extreme wastage of many of crores of World Bank’s said huge loan money but also responsible for your’s [harshwinder] present mentally distressed & financially ruined conditions

    2 . Comments of Large Nos. of honest peoples* for CVC of India & 3 most corrupt/ highly Powerful Govt. organizations Of India i.e. – 1st Airport Authority Of india, POWERGRID Corporation Of India Ltd. & FooD Corporation Of India]:-

    Comments: Non-activity of CVC to take “Suo Moto” action of CVC of India on your’s [harshwinder’s] all 13 complaints/ cases even after seen the fake & fraudulent investigation reports of concerned CVOs of 3 said most corrupt Govt. organizations Of India, is not only responsible for your present financially ruined or can say life & death situations but also for responsible loosing the trust & credibility of people in CVC’s following initiatives:-

    -> CVC’s Project VIGEYE.
    -> CVC’s Vigilance Awareness Week per year.

  3. Er. Harshwinder Singh [No. 1* Ground Water Professional, Ministry of Water Resources Of India] 13 June 2015 at 8:26 pm #

    It is not incorrect to say that I had raised my voices even at 13 times or through 13 complaints since 2009 against corrupt practices of 3 most corrupt Central Govt. Department of India [whose wrong tendered projects had been completed by us in right ways even after taken large loan from banks] and finally joined hands with CVC of India in fighting of corruption which is now resulted into following:-

    Bad experience of one highly reputed Ground Water Professional [I] of Central Ground Water Board [Ministry Of Water Resources of India :

    -> Unlawful blockage of huge loan money till today in which is also resulted into failure of mu highly reputed business of RWH but not only badly but also completely due to not availability of lawful money of actual but highly costly works done in said 3 most corrupt organizations

    Advice for poor & innocent people of India also on basis of above said bad experience/ evidences, it stated that In all 13 cases, every time Fake & fraudulent investigation reports had been provided to me by 3 most corrupt Central Govt. Department of India [also on the behalf of concerned CVO] even after received my 13 complaints from CVC of India].

    Today in India, honesty is not best policy. So, poor but wise Indian people should never raised their voices against corruption/ corrupt practices of Govt. officers especially of Central Govt. Department.

  4. Er. Harshwinder Singh [No. 1* Ground Water Professional, Ministry of Water Resources Of India] 13 June 2015 at 8:30 pm #

    In India, who can help us in our war against corruption/ corrupt practices of Govt. officers

  5. Er. Harshwinder Singh [No. 1* Ground Water Professional, Ministry of Water Resources Of India] 13 June 2015 at 8:38 pm #

    I can give evidences* related to huge wastage of World Bank’s loan money [in crores] by irrigation department, Punjab [Water resources] on the name of installationation of MGWOW projects in various districts of Punjab under HP – 2 from 2008 – 2013.

  6. wiseman salem 18 July 2015 at 10:30 am #

    with love am writing about my country Nigerian the damages corruptions have lead us to by the country who received our stolen money first point second if money stolen by my corrupted leaders and no where to bank this money absolutely the monies will be return back home but with the help of this country supporting them nothing will happen bring that money to my bank is safe you join the wagon of billion club members and absolutely everyone one no this countries which are turning the world upside down absolutely this countries are threat to democracy and capitalism and threat to human existence this act of self enrichment have to be stop is become unbecoming the ordinary poor world peoples living on risk of eradicating them out of our planet word of wisdom if this act cannot be stop we are paving way to third world war where is inequality leading us to absolutely nothing but nothing lets stop corporate corruption as entities we can make it and stop this shameful act of immunities of international corruptions of business there was a day I come across it in the web that corruptions is part and parcel of business in the world class of business is shamble and criminal act which have to be stop or not we are threating capitalism to be abolish and personal I love democracy is freedom of speech anyone can express himself and the peoples elected there government by votes is good and excellent but why are we so much in love of money than love of the world innocent peoples I personal give thanks to bill gates charity is sending the messenger to the world.best regards salem wiseman,

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