Overview of Procurement and Integrity at the EIB Andreja Neral Lamza & Mirela Lascu, European Investment Bank European Investment Bank
The EIB: the EU bank Shareholders: 28 EU Member States Around 90% (EUR 75.4bn) of lending within the EU Around 10% ( EUR 8.38bn ) of lending outside the EU 22/05/2017 European Investment Bank 2
The EIB: Integrated in the EU accountability system EIB Statute Integral part of Treaty on the Treaty on EU the Treaties functioning of the EU The EIB is accountable European Ombudsmen in front of: European Court of Justice 22/05/2017 European Investment Bank 3
The EIB’s Guide to Procurement (GtP) EIB’s Anti-Fraud Policy - reflected in the GtP - Inside EU Outside EU Zero Tolerance Policy which applies to all EIB activities, staff members and National Law GtP counterparts implementing EU principle based Policy established in close Directives consultation with Civil Society, NGOs Following the and also OLAF (public consultation) Treaty principles ( equal treatment, ETHICAL CONDUCT non-discrimination, mutual recognition, For entities or individuals found to have proportionality and engaged in fraud or corruption in EIB financed projects the Bank… transparency) No standard … may declare and … may cancel all or templates and individual or an entity part of the Bank ineligible. financing. tender documents like Fair and transparent process – most of other respondent has opportunity to review the MDB’s have evidence and comment 22/05/2017 European Investment Bank 4
The Covenant of Integrity (CoI): GtP Annex 3 Applicable to all contracts outside the EU (no threshold; public & private sector included) CoI Obligation for tenderers (extended to Obligation of keeping the sub-contractors) to records for possible declare if they have auditing (extended to been excluded by the the sub-contractors) EU Institutions or the main MDBs It is important that all links in the chain stay strong → it is vital that all parties report any suspicions of fraud or corruption immediately! 22/05/2017 European Investment Bank 5
EIB’s Inspectorate General Fraud Investigations Operations Mandate: investigates fraud, Ex-post evaluations of Evaluation EIB Group’s Operations corruption, collusion, coercion, obstruction, money-laundering and financing of terrorism Fraud Inspector Legal basis: EIB’s Anti -Fraud Policy Investigations General approved by Board of Directors Source of allegations may be internal or Handles allegations of external Complaints maladministration Mechanism Right to examine/copy relevant books and records held by EIB’s borrowers/ promoters/ contractors/ suppliers etc. European Investment Bank Group 6
The Fraud Investigations Division (IG/IN) REACTIVE IG/IN’s Investigation Activity PROACTIVE (PIRs) European Investment Bank Group 7 7
PROACTIVE INTEGRITY REVIEWS PIRs of EIB loans to Financial Intermediaries – schemes and indicators of misuse of funds European Investment Bank Group 8
PIRs of EIB loans to Financial Intermediaries: Control issues Examples of institutional problems identified at some Financial Intermediaries - Commercial Banks as well as Public Promotional Banks: ‣ Weaknesses of internal control systems ‣ Weak or lacking AML/CFT policies, absence of compliance officer, no PEP policy ‣ Inadequate monitoring of related parties and PEPs ‣ Some Public Promotional Banks are not regulated by the local Banking Agency ‣ Political committees of government ministers overriding negative credit decisions without adequate business rationale justification European Investment Bank Group 9
PIRs of EIB loans to Financial Intermediaries – Irregularities identified ‣ Indications of money laundering ‣ Irregularities with regard to the purpose of the allocations ‣ Final Beneficiaries acting as front companies set up to obtain funds to the benefit of other related entities, which by themselves would not be eligible for SME funding European Investment Bank Group 10
Annex PIR on a road project in the Balkans – Fieldwork A motorway project European Investment Bank Group 11 22/05/2017
PIR on a road project in the Balkans – A motorway project Findings: EIB found evidence of fraud in Remedies: the selection of subcontractors: entity appointed to deliver metal barriers 1. Repayment of approx. Euro turned out to be a bar 1m (the amount of irregularities identified) 2. Modifications to the requirements for another motorway project to be financed by EIB Implementation: The borrower implemented the requested changes (additional controls, composition of the PIU, external supervising engineer) and the EIB resumed lending for the new project. European Investment Bank Group 12
PIR in the Balkans - Actions taken 1. For another ongoing project with the same borrower 2. For future projects European Investment Bank Group 13
PIR in the Balkans - Preventive measures for another ongoing road project TA Consultant’s DIRECT REPORT REPORTING OF ANOMALIES MONITORING • • Controls & To all co- • Prompt report checks financers, to the Promoter • performed by Update min. who must Technical every 6 months promptly report to Assistance OR when major EIB’s IG/IN Consultant sub contract awarded OBJECTIVE = confirm a transparent procurement process + prevent appointment of subcontractors that : - do not hold the necessary certificates/licenses or - are affiliated to political parties or - have no relationship with civil construction business European Investment Bank Group 14
PIR in the Balkans - Recommendation of preventive measures for future projects Procurement policies Rules governing use of subcontractors Identification and reporting of irregularities Code of Ethics 15 European Investment Bank Group
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