World Bank to implement Volcker panel recommendations

25 January 2008

Following the resignation of Suzanne Rich-Folsom, the previous head of the World Bank's anti-corruption unit and the embarrassing revelations of extensive fraud in several of its health projects in India, the World Bank announced on January 23, 2008 that it would implement all the recommendations of the Volcker Panel Review.

In February 2007, the World Bank commissioned an independent review of its internal anti-corruption unit, known as the Department of Institutional Integrity (INT). The review panel, led by former chairman of the U.S. Federal Reserve, Paul A. Volcker, released its report in September 2007. Among other things, the panel found that INT faces "serious operational issues and severe strains in relations with some Operations units," and this has at times contributed "to counterproductive relations between the Bank and borrowers and funding partners."

The World Bank has broadly endorsed all of the recommendations of the Volcker panel. Some of the key recommendations include:

• INT Status and Reporting Lines: The INT Director should retaining a direct reporting line to the President. The Director should also carry the rank of a Vice President, placing INT’s status on a par with its organizational counterparts. The Bank should remove from the present title and responsibilities of the INT Director the term “Counselor to the President.”

• Independent Advisory Oversight Board: A small external Advisory Oversight Board should be established to protect the independence and strengthen the accountability of INT.

• INT Consulting Unit: To address the need for non-investigative services from INT, the Bank should provide resources for the creation of a consulting unit within INT, staffed by professionals with experience in investigations, operations management, auditing, and the Bank’s legal framework.

• Action Plan to Follow INT Findings of Corruption: To ensure coherence, effectiveness, and accountability for the Bank’s unified response to final INT findings of fraud and corruption, the President should designate the relevant Managing Director (or other senior official) as accountable for a timely and comprehensive action plan for the President’s approval with respect to issues of remedies, disclosures, referrals, and future prevention related to INT’s findings.

For the full list of the recommendations:

Independent Panel Review of the World Bank Group Department of Institutional Integrity_Recommendations, September 13, 2007. (Acrobat pdf, 122 KB) (BIC website)

Resources

Independent Panel Review of the World Bank Group Department of Institutional Integrity, September 13, 2007. (Full Volcker Panel Review report) (World Bank website)

Independent Panel Review of the World Bank Group Department of Institutional Integrity_Executive Summary, September 13, 2007. (World Bank website)

World Bank Group To Implement Volcker Report, Press Release, January 23, 2008 (World Bank website)

World Bank to act on anti-graft report, by James Politi, January 24, 2008. (Financial Times website)

Controversial head of World Bank's anti-corruption unit resigns, January 16, 2008. (BIC website)

Volcker report finds Bank ineffective in addressing corruption, September 14, 2007. (BIC website)