Four innovative ways the World Bank is fighting corruption

By Arturo Herrera Gutierrez and Jean Pesme

Corruption disproportionately impacts the world’s poorest and most vulnerable, driving up costs and reducing access to basic services. It undermines trust in governments and fuels conflict and fragility. It enables the circumvention of environmental and safety controls, contributing to pollution, environmental damage and substandard infrastructure. Corruption also erodes private sector confidence and investor confidence. And it reduces local revenues through tax erosion, depriving governments of the means to finance public goods.

That’s why combating 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 manage corruption, engagement with international partners and global policy initiatives, and robust mechanisms to protect the integrity of our financed activities.

While progress has been made in combating corruption, it has been slow and uneven, and corrupt practices continue to flourish. This corruption can take many forms, from “greasing the wheels,” petty bribery and influence trading and nepotism to large-scale embezzlement of public funds and state capture by those in power at the highest levels of government. The corrupt hide and move their illicit profits through opaque corporate entities in other countries and invest in overseas luxury assets such as real estate. This requires the assistance of banks, lawyers or other professionals, the “enablers.”

So while country-level initiatives to improve the prevention and detection of corruption are crucial, they must be complemented by efforts to address its transnational dimensions. The World Bank’s work has evolved to address this growing complexity of corruption, including to address its transnational dimensions and to better tailor our work to different contexts. We are also taking a more integrative approach to strengthen our focus on results and outcomes, mobilize new knowledge, data, tools and partnerships, and link our work to key areas vulnerable to corruption.

In particular, below are our four main approaches to this work:

Data and technology. Deploying technology and data can generate evidence to guide anti-corruption reforms and make them more sustainable when used by formal institutions and civil society. It can also help strengthen and automate controls, introduce risk-based approaches to auditing, and improve transparency of spending, procurement, and service delivery. Risk-based data platforms can help oversight institutions target their investigative resources more effectively, and civil society observatories can engage citizens in both monitoring and demanding greater accountability in public procurement.

For example, artificial intelligence tools are being tested to automate the prioritization of audits by tax authorities in Georgia, where tax authorities identified potential tax evaders with 63 percent accuracy. A Governance Risk Assessment System (GRAS), The test, which was conducted at three levels of government in Brazil, can identify about 200 signals of potential government spending fraud.

Reducing corruption in government procurement and contract management. The impact of corruption in procurement goes beyond cost, quality and value for money. The World Bank supports governments in adopting and strengthening electronic procurement systems and using procurement data to improve the value for money and integrity of government spending. Reducing collusion, contract steering and other forms of corruption in procurement reduces capture by politically connected firms, creating more inclusive markets and opportunities for small businesses.

Strengthening accountability institutions. Integrity and accountability of government are supported by various measures and institutions. Solutions need to be tailored to the local context and the corruption risks present there. New applications of data and technology, stronger anti-money laundering tools and financial integrity policies help ensure that mechanisms such as income and asset declarations for government officials, whistleblower protection and conflict of interest management are effectively implemented. Risk-based auditing is increasing the role of supreme control institutions. There are exciting developments in procurement data analytics (ProAct) that support all these goals.

Transparency of ultimate beneficial ownership and combating illicit financial flows. Because money is a key motivator for large-scale corruption, it is important to address the institutional vulnerabilities that enable these practices and to track the funds after corrupt acts have been committed. This requires transparent beneficial ownership arrangements to prevent and expose the complex ways in which the powerful use corporate entities such as shell companies and trusts to manipulate bids, embezzle government funds, and keep their stolen wealth offshore. It also requires stricter regulation of enablers and a competent enforcement apparatus that can trace funds across borders and engage in international cooperation.

For example, the World Bank’s Financial Stability and Integrity Unit helps countries assess their national money laundering risks and implement robust anti-money laundering systems. The Stolen Asset Recovery (StAR) initiative, a joint initiative of the World Bank and the United Nations Office on Drugs and Crime (UNODC), facilitates the return of corruption proceeds to affected countries.

To achieve long-term economic growth and shared prosperity, we must work with partners in governments, international organizations, the private sector, academia and civil society to tackle corruption and its corrosive effects. That’s why we launched the Anticorruption for Development Global Partnership, which brings together 250 partners committed to fighting corruption. We also contribute to the Financial Action Task Force (FATF) global standards on beneficial ownership transparency, conduct assessments and support country implementation of solutions.

FATF, an intergovernmental body, leads global action to combat money laundering and terrorist financing. Together with UNODC and the Organisation for Economic Co-operation and Development, on behalf of the G20 Anticorruption Working Group under the Brazilian chairmanship, the World Bank recommends anti-corruption measures applicable to G20 countries and beyond.

Massive financing is needed to address challenges related to climate, health, fragility and other key development issues. We must mobilize all available tools to counter the effects of corruption in diverting much-needed resources and undermining development outcomes, and unlock the positive dividends of building trust, mobilizing resources for development and protecting the integrity of public investments.