Overview of Procurement and Integrity at the EIB. Andreja Neral Lamza & Mirela Lascu, European Investment Bank

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1 Overview of Procurement and Integrity at the EIB Andreja Neral Lamza & Mirela Lascu, European Investment Bank European Investment Bank

2 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

3 The EIB is accountable in front of: The EIB: Integrated in the EU accountability system EIB Statute Treaty on EU Integral part of the Treaties Treaty on the functioning of the EU European Ombudsmen European Court of Justice 22/05/2017 European Investment Bank 3

4 The EIB s Guide to Procurement (GtP) EIB s Anti-Fraud Policy - reflected in the GtP - Inside EU National Law implementing EU Directives Outside EU GtP principle based Following the Treaty principles (equal treatment, non-discrimination, mutual recognition, proportionality and transparency) No standard templates and tender documents like most of other MDB s have Zero Tolerance Policy which applies to all EIB activities, staff members and counterparts Policy established in close consultation with Civil Society, NGOs and also OLAF (public consultation) ETHICAL CONDUCT For entities or individuals found to have engaged in fraud or corruption in EIB financed projects the Bank may declare and individual or an entity ineligible. may cancel all or part of the Bank financing. Fair and transparent process respondent has opportunity to review the evidence and comment 22/05/2017 European Investment Bank 4

5 The Covenant of Integrity (CoI): GtP Annex 3 Applicable to all contracts outside the EU (no threshold; public & private sector included) Obligation for tenderers (extended to the sub-contractors) to declare if they have been excluded by the EU Institutions or the main MDBs CoI Obligation of keeping records for possible auditing (extended to the sub-contractors) 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

6 EIB s Inspectorate General Operations Evaluation Fraud Investigations Mandate: Ex-post evaluations investigates of fraud, corruption, EIB Group s collusion, Operations coercion, obstruction, money-laundering and Inspector General Fraud Investigations Complaints Mechanism financing of terrorism Legal basis: EIB s Anti-Fraud Policy approved by Board of Directors Source of allegations may be internal or Handles allegations of external maladministration Right to examine/copy relevant books and records held by EIB s borrowers/ promoters/ contractors/ suppliers etc. European Investment Bank Group 6

7 The Fraud Investigations Division (IG/IN) IG/IN s Investigation Activity REACTIVE PROACTIVE (PIRs) European Investment Bank Group 7 7

8 PROACTIVE INTEGRITY REVIEWS PIRs of EIB loans to Financial Intermediaries schemes and indicators of misuse of funds European Investment Bank Group 8

9 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

10 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

11 PIR on a road project in the Balkans A motorway project Annex Fieldwork European Investment Bank Group 22/05/

12 PIR on a road project in the Balkans A motorway project Findings: EIB found evidence of fraud in the selection of subcontractors: entity appointed to deliver metal barriers turned out to be a bar Remedies: 1. Repayment of approx. Euro 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

13 PIR in the Balkans - Actions taken 1. For another ongoing project with the same borrower 2. For future projects European Investment Bank Group 13

14 PIR in the Balkans - Preventive measures for another ongoing road project TA Consultant s MONITORING Controls & checks performed by Technical Assistance Consultant REPORTING To all cofinancers, Update min. every 6 months OR when major sub contract awarded DIRECT REPORT OF ANOMALIES Prompt report to the Promoter who must promptly report to EIB s IG/IN 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

15 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 European Investment Bank Group 15