Video: Corruption in Construction | Case Studies & Compliance Strategies | Duration: 3696s | Summary: Corruption in Construction | Case Studies & Compliance Strategies

Transcript for "Corruption in Construction | Case Studies & Compliance Strategies": Value from today's discussion. My name is Rama Bayraktar. I'll be, hosting and moderating the webinar today with our lovely panelists. I work as an associate at the Institute of Financial Integrity, and we're really excited to have you all today. Before we get started, I just want to go through some housekeeping items. Please note that today's webinar is being recorded. We'll be sure to share the link with you to revisit or share with your colleagues after the event is complete. We also encourage you to ask questions and share your comments. You'll see a q and a tab, on screen in the console to your right side. Please feel free to submit questions throughout the webinar for us to address collectively live during today's session. You'll also note that there's a tab called docs, also on the right hand side of your screen, which includes a few documents that we've uploaded for your reference during today's discussion. After the conclusion of today's event, you'll receive a follow-up email including a link to the webinar recording as well as other information for further reading. As we get started, I would like to introduce our esteemed speakers for today. Today, we're joined by, Steve Burgess. Steve Burgess is a British national who has spent over 2 decades working on risk management and the prevention of fraud and corruption in World Bank Investments. Steve has brought practical experience through his work at the bank and has given advice on dozens of multimillion dollar investments worldwide. Steve has hands on experience of working in post conflict and post disaster areas. His field based experience has convinced him of the importance of understanding potential solutions within their socioeconomic and political context. We're also joined by my colleague, Nikki Kenyon. Nikki Kenyon is an associate managing director at IFI focused on content and training. She has more than 15 years of experience in the private sector and in government service, including the Treasury's Office of Intelligence and Analysis. She has managed teams that provide that provide a due diligence, know your customer, sanctions compliance, money laundering, and counterterrorism research and analysis for government clients. Nikki has participated on several panels and webinar discussing topics such as the role of AI and sanctions and an AML compliance, grappling with the volatile global sanctions environment, and assessing activities of Russian oligarchs. We're also joined today by Chris Williams. Chris is the is the senior director for anti fraud and corruption at the Millennium Challenge Corporation. He has 30 years of international and US based experience in program management and technical assistance provision. In his previous roles, Chris has assisted in a number of risk management initiatives, managed the process for receiving and responding to allegations of fraud and corruption, and conducted internal reviews of MCC operational processes to identify and disseminate lessons learned. Chris has worked on several global projects, including assistant assisting the government of Moldova in promoting economic growth and managing operations of land reform projects in the Russian Federation and in Ukraine. Last but not least, we have James Wasserstrom. James is a sec is a seasoned anti corruption expert and activist with extensive experience in post conflict settings. He spearheaded anti corruption cleanup efforts in Kosovo's public utilities during the UN administration mission and served as the US as the US Embassy's anti corruption adviser in Afghanistan for 5 years. Afterwards, he joined the US special inspector general for Afghanistan Reconstruction and led the team that drafted the corruption and conflict lessons learned from US experience in Afghanistan, which is the definitive report to congress on the topic. James also founded an anti corruption anti corruption commissions in Ukraine and Moldova focusing on security and defense sectors. Additionally, he's the founder of the Integrity Fellowship and Sanctuary in Toronto, which provides refuge for whistleblowers and activists facing severe retaliation in countries lacking adequate protections. So we're very excited to have all of our speakers today. We are going to start off our discussion with Steve, helping us understand fraud patterns. Well, thank you very much for that, introduction. I've been asked to talk a little bit about 3 of the the key aspects that I think tend to drive fraud and corruption risk. So, the first of these is is, of course, money and how it people's desire to get involved with fraud and corruption. The second is setting, and the third is something I call it opacity or the fact that something can be hidden or partially hidden. So I'm gonna cover the first of these 2. I'm gonna cover money and and opacity first, I think, because for me, these are 2 that are probably most easily tackled in the in our work. Generally, fraud and corruption does seem to follow the money. I mean, where you have large amounts of money moving, you tend to get people who are interested in fraud and corruption following it. But not all money is created equal. If a project is being funded by a government or if a project is being supported by the World Bank or if a project is being so supported by, USAID, they might all be the same kind of project and they might all be in the same country, but they will tend to have different types of character. They may have different current contracts. Payment the way payments are made may be different. Some may be slower or faster than others. There may be different types of complaint mechanisms, and the arbitration mechanisms might be different too. And these all have to do with how money flows through the system. And if you're a contractor, how you'll be paid, or if you're an investor, how your money is being used. So this the the the way that money flows is incredibly important, not just the amount of money that's right. And corruption levels are not just influenced by pure greed in in the money that's available. People sometimes invest upfront in the hope of getting into a market, where later on, they can win a contract. So it's it's vitally important to understand, how funds are accepted and how they flow through the system and how the related decision making processes work. Whether you're an investor or a contractor or a supplier, to know how that money is being, moved is important, not just how much money is being moved. Often fraud and corruption tends to focus a lot on the procurement process, on how contracts are awarded. From what I'm seeing, that tends to be the focus because procurement is a visible part of the contracting process. When a bid is let out or tendered, people see it. People are are in competition with with each other and so forth. And claim procurement is a good start, but it's when the money really flows through the system that you have the biggest, fraud and corruption impacts. And that's often not at the procurement stages further downstream. It's, quite literally when the when the rubber hits the road. So resolving weak procurement doesn't always make the bad guys give up and, and go home. A few words on opacity, if I can, and then I'll get back to the setting on the next slide. So on on opacity, things often happen in construction companies which are quite behind the scenes and not very visible. And that's why a lot of us believe that transparency is part of the, the way that we can fight fraud and corruption. Lots of things that you assume are happening because the procurement process has been clean, don't necessarily happen when the contract has been awarded. So things like variation orders, addendums, amendments, and so on can often be problematic. And even things like the amounts and the specifications on a a bid can be quite opaque or even hidden. So who has access to the information, and is access shared in the way that it should be shared? If it's opaque, then there's quite likely there's gonna be a problem. Things like if you're getting into the construction market for the first time in a new country, whether you're an investor or a constructor or supplier, and you have to work with other local comp with with local companies, do you really know who owns them? Is beneficial ownership perhaps a problem with those companies? So the setting in terms of of who you're going to work with is also very important. And if it's opaque, if you're going to be working with part of an arrangement with other companies, that arrangement needs to be absolutely certain. And infrastructure itself can often have hidden significance. Sometimes they're just vanity projects, Sometimes a road is being built just for logging and so forth. And getting involved in those kinds of contracts can can bring their own risks to to a company. So really understanding what a contract, or a project is is doing is very important. If it's opaque, if you if you can't see exactly what's going to happen, then you're you're in a risky situation. And, of course, the projects themselves are often difficult to judge once they've been built. The top coat of plaster, the layer of asphalt, often hide a lot underneath them. Have the right materials been used? Has the right quality of work been carried out? So even judging a project, during and after it's it's being built, that in in itself can create risks. So again, opacity, if if something isn't being monitored very well, then there's likely to be a risky operation. And this is something again that we can influence by increasing transparency and involving oversight from, third parties in the in the process. Increasingly these days involving civil society organisations is becoming, quite popular amongst projects. So, you know, as as the world becomes more transparent and mobile phones and and other gadgets become more common, it becomes easier for people to watch what's happening. And so, hopefully, projects become less opaque, and the contractors and and, and other people involved in projects become, you know, more, do what they say they're going to do in the contracts that they sign. But the the more opaque a contract or a project is, the more risky it tends to be. And if we can move to the second slide, this is what I think everything boils down to, is the setting. Think of a project in a in a in a province that's had 30 years of experience in in doing a certain infrastructure, let's say roads or the construction of of of government buildings or something like that, if it's a well established setting, there may be particular risks involved in that. So, for example, there may be well accepted norms and practices, concerning the way that officials interact with companies or interact with, suppliers. There may be well established norms on how things are overdesigned and then under implemented. And if you were just moving into that market, it's important that you understand what the norms and, really are. Not just the the laws that apply, although it's very important that you understand that, but also the norms that apply in that local context. Breaking into that kind of situation, which is already well established and things might be happening behind the scenes, in itself can be a risky proposition. And it's worth finding out what the rules and norms are. Sometimes it's not difficult because, you know, other, contractors and and companies or investors may already know. If you look around the market and you see that well established, respected companies are not moving in, you should ask the question, why is that? And, and and and talk to people who would know. But now imagine a a new housing program, and and it needs an enormous amount of supplies, or a new, railway program, it needs an enormous amount of supplies. There may not be established fraud and corruption links there, but the fraud and corruption is still a risk. And it may be a more ad hoc risk. So you are looking for different indicators of what would show whether or not your your, company is gonna be at risk by, becoming involved in that sector. So just because something is established or not established, you you may be looking for different types of risk, but the risks are always going to be there. So look at the history of the market and the prime actors who are operating. Now often it's not difficult to discover well established tricks that are being used in that setting. For example, in bid ringing or in bid rotations. It also might be known that in certain settings, it becomes necessary to donate to a particular charity or to a particular, political party, or it may be necessary to to support something which is being, run by the president's son or something like that. Well, you know, you you really need to be very careful before you enter that kind of situation, and make sure that what you're doing doesn't fall foul, not just of the local laws, but of international laws. And, if you're an American company or if your funds flow through America in any way, of course, the there are, rules and laws that apply from America, not just in that in that country where you're working. Sometimes, short discussions with people working in the sector can reveal a lot of these problems. Sometimes abuse may be carefully hidden, sometimes not. It all depends on the on the setting of of what you're about to become involved in. And the more you learn, the less risk you're likely to have. So it's important to to reach out. And sometimes that might mean, hiring someone who's an expert in, the prevention of fraud and corruption. And, you know, we're hosted today by, an entity which is providing that kind of training to people who can understand, settings and situations well. So watch out for the long term issues, where there are signs, whether it be in the news or whether it be on social media about the kinds of risks you might be facing. When looking for a potential contract or investment, the specific probability of exposure to people offering or demanding bribes really needs to be carefully considered. And it might well be that that information is already out there and you can find it. And obviously be very careful with who you sign any agreements with. The last word I want to say on this before we hand over to the next speaker is that context is not static. And just because everything is fine when you sign your agreements with a government or, a, a development agency, or another company, Things change as infrastructures are built. Governments change, rules change, laws change. So it's important to keep your eye on how the setting itself, is evolving. And I think that might be a good, prompt for some some of the speakers who follow me. But those are the three things that I want to mention today as being careful to keep an eye on the money, how it flows, and how it how it how it moves, and how you can access your payments, the opacity, whether things are clear or not in any given setting, And then the setting itself, who's involved, what's involved, what are the stages of any given contract. And I'll I'll hand over there. Thank you. Thanks, Steve. And I I I have to also add, you know, when you talked about, ultimate beneficial beneficial ownership, And it's not just about who owns a counterparty, but what kind of links they have to other entities that may be problematic. So, you know, as bad guys develop their methodologies, you need to dig deeper. Right? So let's talk a little bit about the regulations, and I will put a disclaimer out there right now. I am not a lawyer. I I do understand what regulations there are out there. So if you have legal questions, we'll try and get those answers for you. But let's, you know, let's talk about this. Bribery is, of course, illegal. So US law states that whoever gives or promises anything of value to any public official with the intent of influencing said official, prompting them to commit fraud or induce them to violate their lawful duties, that person or entity is guilty of bribery. And we're talking anything of value. Right? So if you remember the fat lettered case, right? You know, he he threw prostitutes at US naval officials. He gave them really super expensive dinners. He bought their wives expensive, purses and other goods. Right? So anything of value. At the same time, the United States is also signatory to numerous international anti bribery conventions. And what I did on the slide was mention a couple of cases that you should be familiar with. So first, we have Odbrecht. It's the Latin American construction giant that built some of the most critical infrastructure projects in the region, but in 2016 was exposed for being involved in one of the biggest corruption cases ever. The company was one of the biggest political donors in Brazil. Autoborrect is one of the firms that was caught up in Brazil's corruption probe into the state oil giant Petrobras called Operation Car Wash. Dozens of companies acknowledged paying bribes to politicians and officials in exchange for contracts with Petrobras. Otabrax executives have confessed to paying bribes in exchange for contracts, not only in Brazil, but also in various parts of the world. An international task force of investigators is looking into bribery in 10 different countries, including countries like Argentina, Colombia, Ecuador, and Venezuela. I just mentioned Petrobras. The, Brazilian oil giant was in the middle of this operation car wash. Operation jet wash is also the way it's known. That began as an investigation into, like, a small car wash in Brasilia over money laundering and grew into this massive scandal that implicated politicians, government officials, and former presidents. Political appointees and state owned enterprises systematically extorted bribes from public or from private sector suppliers. Petrobras paid some of the largest bribes, and investigators have also said that contractors formed a cartel, and we'll discuss the that those in a few, involving the country's largest engineering conglomerates, like Odebrecht, like Grupo OAS, and others to share government contracts among themselves and collude with corrupt politicians. So what happens when construction companies form a cartel? Well, for 1 bid rigging, it's a collusion tactic where companies cooperate to determine the winner of a contract instead of engaging in fair competition. So the contractor that won a contract to build a road, let's say, might not be the best contractor. Bid rigging is a criminal offense in most of the OECD jurisdictions and illegal in all of them. So the UK last year fined 10 construction firms, nearly £60,000,000 total for bid rigging in which a cartel of construction firms agreed between themselves to submit bids that were deliberately high and meant to lose the tender after predetermining who would be the winner of the tender, the winner. The company that submitted the lowest bid of the lot, but still higher than the norm would win that contract. And 5 of the firms were involved in arrangements where the winner would compensate the loser companies, and the firms produced false invoices to hide the compensation. Right? I also mentioned, Deutsche Bank that in 21 agreed to pay more than a $130,000,000 to resolve the, the foreign corrupt practices act, FCPA, and fraud charges by the justice department. Deutsche engaged in a criminal scheme to conceal payments to so called consultants worldwide who served as conduits for bribes to foreign nationals and others so they could unfairly obtain and, retain lucrative business projects and shows you how corrupt money can travel through financial institutions, and Deutsche is a major financial institution, to corrupt officials and how consultants and other gatekeepers can act as proxies for for foreign officials who facilitate payments. So on the next slide, we'll discuss a bit more about the FCPA, the foreign corrupt practices act. It was passed in 1977. It criminalizes the offering of a payment or a bribe to a foreign official, but it did nothing to punish foreign officials who demand or accept bribes. Right? So little unfair. So if a US company pays a bribe that's been demanded by a foreign official, they can be prosecuted, but the foreign official isn't. Apparently, some 80% of these foreign officials are never criminally by their home governments. So US entities were liable for corruption, but foreign politically exposed persons or pets and government officials were not. The FCPA also extends to foreign companies and individuals who engage in corrupt practices while in the United States even if the actual bribery occurs outside the country. So if you're in the country and you violate US law, you're liable. Right? You can't commit murder while you're here. You can't violate sanctions while you're here. You're liable, especially if your company has a US presence. The, FCPA governs not only direct payments to foreign officials, candidates, and parties, but also payments made to any other recipient if the payment is made to influence an official candidate or party. These payments are not restricted to mon monetary forms. Remember I told you anything of value. And the DOJ, the justice department, and the SEC share enforcement authority. The, FCPA addresses the problem of international corruption in 2 ways. 1 is the anti bribery provisions prohibit individuals and businesses from bribing foreign government officials in order to obtain or retain business. And 2, the accounting provisions impose certain record keeping and internal control requirements on issuers and prohibit individuals and companies from knowingly falsifying and issuer's books or records or circumventing or failing to implement an issuer system of internal controls. So there's a lot there. Violations of the FCPA can lead to civil and criminal penalties, sanctions, and remedies, including fines, disgorgement, and imprisonment even. You know, a couple of examples, the Corporacion Financiera Columbiana, and I apologize for butchering the language. We'll call it Corfi Columbiana. Last year, agreed to pay more than $80,000,000 to resolve a parallel bribery investigation by criminal civil and administrative authorities in the United States and Colombia stemming from the company's involvement in a scheme to pay 1,000,000 of dollars in bribes to high ranking government officials in Colombia to win a contract to build and operate a highway toll road known as the Ocana Gomara Extension. Again, Spanish is not one of my languages, so I apologize for butchering the language right here and now. And, again, this was involved with the Odabrak scandal. Ricardo and Luis Martinelli Linares, they're the sons of former Panamanian president Ricardo Martinelli. They directed 1,000,000 of dollars in bribes through US banks into their own Swiss accounts to help autoborrect gain corrupt influence at the highest level of the Panamanian government. The scheme involved the payment of more than $700,000,000 in bribes to government officials and public servants and political parties and others in Panama and other countries around the world. So it's crazy. Right? Congress in late last year actually did something to remedy the whole situation of it being unfair to US companies who pay bribes to address the demand side of the equation. The foreign extortion prevention act, it was passed in December. It was part of the annual spending bill. FIFA or, you know, makes it a crime for a foreign official, including any employee of a foreign government or any current or former senior official of a foreign government to demand or accept a bribe from a US person or company or from any person while in the territory of the United States in connection with obtaining or retaining business. So FIFA amends the US bribery law, which I mentioned earlier, to make it illegal for any foreign official to demand, seek, receive, or accept a bribe from a US person or company or from any person while they're located in the United States. Violators could face a criminal fine of up to $250,000 or 3 times the value of the bribe, whichever is greater. FEBA is pretty new, obviously, just passed in in late December. So we don't have any settlements or convictions yet that I am aware of. But what it's meant to do is protect Americans from bribe demands when they're working abroad and allow the Justice Department to use this tool to fight foreign corruption at its source. You know, it can this type of foreign corruption can influence any number of things. You know, Transparency International recently provided a bunch of examples of the harms that are caused by foreign bribe demands. You know, in Uganda, they accepted bribes from a from an adoption agency in Ohio that facilitated the trafficking of Ugandan children. In Mexico, drug cartels, you know, an attorney general used his position to accept bribes from them in a scheme to distribute thousands of kilos of all sorts of drugs. In Indonesia, another senior government official used his position to accept bribes from a Missouri based agricultural company in exchange for undermining a requirement under Indonesian law that an environmental impact study be conducted before the sale of genetically modified crops. These types of bribes can result in everything from, you know, shoddy construction to environmental damage to anything, you know, like that. And this is what we're discussing here, as part of this corruption in construction webinar. So what I'd like to do next is go to the next slide, and I'll bring up Chris Williams who will talk about some of the preventive measures that can be used. So hi, Chris. Hi, Nikki. Thanks a lot. Hi, everyone. This is Chris Williams. I'm with the Millennium Challenge Corporation. We're a, US government agency, that is involved in international development. Our budget our annual budget's around 900,000,000,000 development. Our budget our annual budget's around $900,000,000,000 a year, and most of that money goes to construction. So we are very concerned about risks of, fraud and corruption associated with construction. If we can go to the next slide, I can, go over some of the basics that, none of this is rocket science. Most of you would be aware of these, controls, and actions that we recommend that you, that you take. I'm talking from the perspective of a donor or funder organization, but these also apply to even, private corporations that are, that are running their own construction projects. They should be thinking about these things as well. First is, dedicating funds and personnel to anti corruption. You need you need to dedicate funds and personnel to this. It doesn't happen by itself. The, if if there is nobody thinking about it and nobody responsible for it, it it generally does not happen. You might get lucky, but you're better off making sure that there are dedicated funds and personnel. You also, want clear and explicit rules, forbidding fraud and corruption, and requiring disclosure of conflicts of interest, and reporting of potential fraud or corruption with signed acknowledgements that people have, that are that people are aware of these rules. This is, I mean, it sounds and it is, fairly bureaucratic, but it is very important, if you want to have real consequences, which is the, the last bullet. Making sure that people are aware, everybody, the, the the contractors that you're hiring, if you have supervisor engineers overseeing them, those people, anybody working for the the donor or funding organization itself, you need to make sure that they are aware of what rules are, and you wanna have evidence that they are aware of it. Because, should there be any sort of investigation later or or even a prosecution if there was, fraud or corruption? It really helps if, there is a document showing that they knew what the rules were, and they can't just claim ignorance. Ignorance isn't a complete defense, but, it can, it can sway people. So having, having the clear and explicit rules is important, and I do recommend making sure that, you know, people on the 1st day of the job are working on a project that they are, given some clear, not too long documents to, to to read, and then they sign that they're actually aware of what these rules are. A more so that's pretty bureaucratic. A more, a more important approach, I would say, is use of international standards. At MCC, we use FIDC type contracts, and, the organizations that we provide funding to generally require them, frankly, in almost all cases, unless it's a very small infrastructure, very small infrastructure, we require the use of a supervisory engineer to monitor construction work. So it's not just the organization that we're, that we're providing funding to that is providing oversight, to works contractors. The organization will hire a, another company, called a supervisory engineer or an independent engineer to watch what the contractor is doing. Those are professional engineers, and, they often have more, they often have a combination of more experience and also, frankly, more bandwidth to carry out monitoring, than the donor organization or the organization that is that is running the construction. This is part of the next bullet qualified oversight. We highly recommend, one, that there's qualified oversight. Like, I I always say, I'm, I'm not an engineer, so I can visit a road construction site, and I can see if, people are wearing their hats and if they're wearing the yellow, vests and if there are, if there are porta potties for the, for the workers, if there's water for the workers. But I frankly have no idea what the if the asphalt mix is correct, if the, substrate that they're using is, the the correct type of materials, if they should even be, working in those current, conditions, like if it's if it's raining or if it's too hot or too cold. I don't know. I'm not qualified. So you need qualified oversight. What MCC does is, we make grants to, to countries that then, carry out their own they they hire companies to carry out, construction works, and they hire supervisory engineers to oversee the construction work, and the the counterpart organizations themselves have staff that oversee it. MCC sends out our own staff. We often have engineering firms that work for us as well, not for our counterpart organizations, but directly for us. We go out and do site visits as as well. I also highly recommend that you do unannounced site visits, not just, not just, you know, every Friday morning, the, you will be visiting the the site, and so they know about it. And, frankly, they have to be pretty bad if they don't have everything looking great when they know you're gonna be there. You should wanna show up on a Tuesday random Tuesday afternoon and see what they're doing. I also recommend to our counterparts that when they hire firms that they tell them that there will be, unannounced site visits. One of our cliches is we're not trying to catch people engaged in fraud or corruption. We're trying to prevent it from happening in the first place. So we want people to know, our counterparts will be showing up. Those of you who are engineers, you probably know, earned value management. You're the if you don't if you're not an engineer I'm not an engineer. You should at least be aware that earned value management is a way of, of comparing estimated value of work completed to the remaining funding. Generally, if you have, if you've spent 80% of your funding and only 40% of the work has been done, you've got a problem. And so you want to keep an eye on that throughout the whole process. We, require that there are clear posted instructions on how to report potential fraud or corruption at construction sites, at, at construction company offices, at the government offices that we work with. People can't report fraud and it's hard for people to report fraud and corruption if they don't know how. So, they may choose not to report fraud corruption. It depends on the culture, in the country and also whether they think anything will realistically happen if they report it. But you have to at least give people the information on how to report potential fraud and corruption. You also need clear responsibility for following up on reports. When reports come in, somebody needs to have the responsibility for, for taking action, signing what to do. And finally, you wanna have real consequences. Most donor organizations, and most governments have suspension or debarment processes. MCC builds into all our contracts the ability to terminate any contract if we find out that there's a fraud or corruption in the contract. Beyond that, of course, there is the potential of, debarment and even prosecution under some of the laws that, Nikki just mentioned. If we can go to the next slide, please. So one thing so MCC does a couple of things that not every ord donor organization, does. I think that these are very good practices. I'd love to see them, adopted by other organizations, or I'd love to hear if other organizations are already doing this. First is building anti fraud and corruption consideration to all stages of the project. You know, if you look at the standard project life cycle, you have beneficiary selection, design, procurement, contract administration, and contract closeout. Steve mentioned earlier the, vanity projects or the white elephants that are built for no other reason than to spend money and generate construction that can then spin off, bribes. So every step of the process, you wanna think about where fraud and corruption could happen. MCC provides anti fraud and corruption training to, to, all, all of our personnel, to our personnel, MCC personnel, and to the personnel of our, of our counterpart organizations. For the I was just in Kosovo 2 weeks ago, and we provided with our office of inspector general 14 hours of training to, the staff of our counterpart organization on what the risk of fraud and corruption are in each stage of the program and, what to do when there are when if they had a report of fraud and corruption if they if they see any, which you also one thing that MCC does, which I think is rare, is we support, our counterparts in a structured process of identifying the specific risks of fraud and corruption facing their specific programs. So we don't just say, oh, there are risks in procurement. Oh, there are risks in contract management. We look at every act project, every activity, and every subactivity and say, to be blunt, we say, put on your fraudster hat, Pretend that you wanna steal money from this program. How would you do that, and how are we going to prevent that? I think that and and I I think that, it is a very useful it doesn't take that much time, but it's a useful, it's it's a useful use of time, productive use of time. Because if people don't spend set aside a little bit of time to think about what the risks of fraud and corruption are, they're going to focus on, to a large extent, they're gonna focus on all the other risks of just getting the project done. So I think it's worthwhile to walk through, and we've got a structured process just like any risk management process, but focused on the risk of fraud interruption in the specific programs. Once our counterpart organizations have gone through that process, they, they they create a a anti fraud and corruption risk register. Again, it's just a standard risk identification, and assessment process. But then they create a anti fraud and corruption action plan that is published on their website, and, and, that is made public to everybody where they identify normally the top 6 to 12 risks of fraud and corruption in their program, and in general, what they're going to do to try to reduce those risks. And then they're, we try to, have them go through a process of of updating that and publicly reporting on that on an annual basis. So that's something that MCC does to, try to, reduce the risk of fraud and corruption, in in the programs that we fund, and I I think that we've been pretty successful so far. I think what next up is, Jim talking about cases where people weren't quite so successful in, reducing the risk of fraud and corruption. Jim? So I will say this, before we move on to the always awesome Jim Wasserstrom, we do have a question that's actually pertinent to what you guys were talking about earlier. And the question is, how does the move by large construction companies to do more design build or EPC contracts change the risk profile for this industry? Steve, do you wanna take that? Sure. Yeah. I mean, there there are the traditional way of having one company do this, one company do this, one company do this, because each had a specialty in those, you know, design, construct and and maintain kind of of contracts, made a lot of sense. There there is also another type of thought on this that if you if the company who designs something then has to construct it, they have to live with their own the nightmares that they've created. So makes them design a better project. And then if the company that actually has to maintain the project is also the one who who constructs it, they're gonna construct it better because in the long term, they're gonna have to take care of the maintenance of the project. That sounds good and rational. However, it does introduce a new set of risks. And one of those risks is, for example, how much money is going to be paid upfront and how is that money going to go in tranches along the lifetime of the project. So that that it does change the risk profile if you have this situation. And if you have a different construction company to the one who designs it, there may be conflict or at least tension between the two, which is not necessarily an, a bad tension for, you know, the construction company can raise issues about the design and so forth, where they might not if they were the ones who designed it. So I say that every type of contract brings with it its own risk profile, really. And for the the longer term that a project is, whether it's design, construct, and and maintain or just design and construct, It does have, a set of consequences as to what the supervision engineer is gonna be doing, what kind of monitoring you're gonna be doing. And that monitoring is not just on the cost or the payments and the and the the amount that's being constructed, but also the quality and the appropriateness of what's being constructed. So I think it is not necessarily a bad thing, this idea of, of EPC or design build contracts, but there are consequences in terms of how they are monitored. And it is really important, I mean, as as Chris was saying, to have a qualified and credible set of people who are the the, supervision engineers and also monitoring the project and every process within the project. So, I I think that might cover it. Thank you, Steve. Alright. Now, case studies. This is so interesting to me and Jim's got a whole lot of experience in this. So, Jim, over to you. Let's look at some of the cases that weren't as successful. Oh, I could go on and on about that one, but I just picked 3. And, just to give you a tiny bit of background about me, I'm actually, as as Chris may have mentioned, I actually get involved in the nuts and bolts of anti corruption on the ground. I and I do this, kind of troubleshooting, for, for governments, which I believe are serious about corruption as well as for individual companies and for for sometimes for, for individuals who are find themselves good guys who find themselves in trouble. And, so the first is is is, Kosovo. This is really where I cut my teeth in the anti corruption world. I wasn't an expert. This goes back maybe 20 years, but, the the events took place less than 20 years ago, when, the the head of the UN administration of Kosovos, we were administering the province. We were the executives of the province at the time before it became an independent country. That he asked me because of my background in the private sector if I would review audit reports Kosovo's public utilities. And this and, of course, lo and behold, in the review of the audit reports, external audit reports, we discovered that these were cash cows for corruption for various officials. So they they asked if I would set up an office that would then oversee, the cleanup of these public utilities. So I went ahead and did that, which I did for 4 years. And the but the way it ended, it was with a bang, not a whimper, which is in this particular case. There was a, very significant contract. As you can see from the slide, it was, €3,500,000,000, which was actually more than $5,000,000 at the time, and there were 4 bidders. And that that it was a very necessary project, coal mine and power plant. It was it was, clearly, it was it was on everybody's list to do, and there were 4 bidders. And this came under me because it it was with the electricity utility. So that was something that I was in charge of overseeing. But I wasn't involved in the decision making on the bid process. The money was going to come from from an IFI, and I'll I'll reveal the source, which is the World Bank. So, sorry, Steve. But World Bank did the right thing. So so the bid decision as it happened was in the hands of my boss, the deputy governor, an American, by the way, as well as the, Kosovo minister for energy and mining. But, because I've been doing this for some time and because I had very close Kosovar friends, throughout the, the Kosovo government and outside, I got a tip, that inside one of the bids was, as you can see, a so called facilitation fee. Red flag. So when we follow the follow the money, the facilitation fee, which was 10% or $500,000,000, was actually a group of 3, members of the former secretariat of the minister of energy of mines, all members of his political party. So huge red flag. And so but on but it turned out from other sources that part of the 500,000,000, if if the bid went in that direction, which it was clearly going to go. It was it was it was obvious that that was the direction it was headed. A big chunk of that was going to go to my boss, the deputy governor of the province. And that the governor, who was a German was aware of this. That put me in a very difficult situation because we were also in charge of law enforcement, etcetera, etcetera. So I had to report this to the UN inspector general, launched a secret investigation with 12 investigators who confirmed, what I had found. But as a whistleblower, which is what I became, I suffered, I was fired among other things, and there were terrible consequences for me personally. But the good news was that the deal fell apart. And, ultimately, what, what, they did was that they broke the electricity utility up into 4 constituent parts, generation, distribution, etcetera, production, each one a separate company, and that particular construction project, was never built. They found other ways to cope with the electricity demands of of Kosovo. So, there were no consequences for any of these individuals despite, the investigation. So to to the point of facilitation fees, this was a pre award. So facilitation fees as well as, hidden connections, which, previous speakers have alluded to. 2nd, so then I moved on to Afghanistan. And if I thought Kosovo was bad, Afghanistan was like the postgraduate studies of corruption, but I'll cover that one last. I also then worked I also worked in Ukraine. There, I was part of one of these commissions, that I helped to establish on anti corruption, with the support of, Transparents International, a variety of donors, and, and it was it was, looking at defense and security sectors. This was from 2016 to 2019. So there was that war going on before this much much larger war. So it was it was a conflict situation. Kosovo was post conflict, and this is a post award, issue that came up. We decided to look, at various aspects of of, defense procurement and and the the behavior of the Ministry of Defense. This was a war, let's remember. And among the issues that we looked at, there were many, but, and we did reports on all of them. But, focusing here only on the construction. As you can see from the slide, the Ministry of Defense, was legally obligated to provide free or low cost housing to veterans and or surviving family members. And there was because of the pace, there was a 40 year waiting list. That in and of itself created lots of opportunities for fraud, waste, abuse, corruption, because if you pay bribes, then you would skip 39 and a half years, and you would, be at the top of the list. That was not what we were looking at. We looked at the massive amount of spending that the government was already doing, to for construction. And the complaints that emerged from those who were assigned these apartments, which we visited, were that that they were substandard. They were sometimes completely uninhabitable, and the number of units that were claimed to have been built was actually far higher than we actually found when we actually went to count. So, we raised this as an issue with the Ministry of Defense. Of course, they, they they objected. They said, no. No. This can't be true. So, but they did not they did not take our recommendations, seriously. This was in the Poroshenko period, so the regime prior to Zelensky. And, so what we proposed, to eliminate this problem completely was a voucher program and turned over entirely to the private sector. So we eliminated we proposed to eliminate the role of the Ministry of Defense in in the contracting process completely. Ministry of Defense rejected, that solution for obvious reasons, And, I I understand this this problem existed for a number of years afterward, and I'm not current on where it stands now, but I but I understand that, that it still needs to be addressed. And, of course, Ukraine, at the moment has, has devastation in terms of of its infrastructure and housing. So now, I'm sure the reconstruction that will inevitably come at some point, we'll have to address, this issue. And by the way, I'm also working on how that reconstruction should take place, to minimize the risks of, of fraud, waste, abuse, and corruption. That's a huge issue, in Washington and in other donor countries. It's also a huge issue, as Steve may know, at the World Bank. So so it's a it's a live topic of conversation as we speak. 3rd, and far from last is my 5, actually, 6 years in Afghanistan, as the US embassy's sole advisor on anti corruption. And I say that, both before, there was there was never anyone with anti corruption expertise before I got there or after I left. So it was it was I was the only one who had this kind of background in the in the 5 years. And I know what happened afterward because as you may have heard from my intro, the intro I did I wrote the report corruption and conflict, lessons learned from the US experience in Afghanistan, for the special inspector general for Afghanistan reconstruction. Sorry, I led the drafting of, there were many people involved, report to Congress, which is available on the website. And, and it is is a very, very detailed analysis of what happened, and who did what. And as you see from the slide, Afghanistan pre and post war, all infrastructure, roads, dams, irrigation systems, power plants, multiple simultaneous manifestations of corruption, such as pay to play, cronyism and nepotism, contract steerage, kickbacks, kick ups, subcontracting to oblivion. So there were multiple subcontracts, from each project that went down to, to a fraction of what the actual award was, and poor quality of delivery. Bribery kickbacks, ghost employees, honestly, and then when I was doing this work in Afghanistan, I never looked at anything that was less than 9 figures, nothing below a $100,000,000. That was the scale. And there were plenty that were, that were 10, that were, I mean, larger. So, so the outcome there, which our report, to congress makes clear is a loss of popular support for the for the government, of of of Afghanistan at the time, and ultimately, the collapse of our effort, in Afghanistan and, the rise of the Taliban. And there's a direct link that we make in the report, to that from all the evidence that we gathered. So, I'm not making it up. So, turning on I mean, I if that isn't depressing, let me press you even further, by, talking about a little bit about, corruption risks that we've that, that exist in every phase. Project identification, financing, planning, design and regulatory approval, prequalification and tendering, execution, operation and maintenance. The risks vary by phase and by local factors, many of which have been covered. But, let me just reinforce what my what my, co presenters, have already presented and add a little bit to it based on my personal observation and experience. You need to know the effectiveness of the justice system where you're, where you're going to work and the nature of enforcement. I won't go into details on these because we're running short of time, but I'll run through them, and we can ask questions or you can get back to me through, my friends and colleagues who are sponsoring this event. So extended due diligence on all prospective partners, clients, goods and services providers, key counterpart individuals and prospective staff that you're planning to hire. Contractual anti corruption obligations that go beyond legal requirements. So they're in your contract. And I know MCC and Chris mentioned this one specifically. Enforceable codes of conduct, not just voluntary for all partners. Key supply chain visibility, try to ensure that you know who's supplying what on what schedule, I'm sorry. I know it's a lot of detail. It goes down into the contract and the subcontractors, but it's really critical. Ongoing assessment and compliance monitoring, audits, performance and financial and whistleblowing mechanisms, as well as the use of global trusted agents in assessment and compliance monitoring. Finally, in terms of resources that you have at your disposal, these are public resources. And, I I'm happy to provide these, I believe, that I I did earlier, to to my my friends and colleagues here on online. The Global Infrastructure Anti Corruption Centre, which is London based. It has an engineering focus, has lots of experience in this area. It's it's free. And, we can give you the website. The open contracting partnership, in Washington that focuses on procurement issues. Also, free with lots of experience. And the infrastructure transparency initiative in London, which focuses on the reporting public transparency, to go to Steve's point about opacity, on public reporting. And with that, I will, stop and go to questions. The always fascinating Jim Wasserstrom. Unfortunately, we've run out of time for questions. I know we had a bunch come in. I would encourage you to go ahead and email us your questions, info at finintegrity.org. We can certainly forward them to our experts or we can answer them in house, but we are always happy to engage. So please, please give us a holler info at finintegrity.org. I wanted to thank Steve and Jim and Chris for sharing their insights with us today. Thank you again to everyone who joined in. We hope you really gained value from our discussion. Last thing I do wanna mention real quick is our next webinar, which will be focused on mastering compliance in digital assets. I I love this. It's it's up to date. It's current. It's exciting. It's different. So please expect a follow-up email in in a bit, including access to this recording as well as other resources for further reading. We really do hope to see you again soon, and thank you so much for your time. See you later. Take care.