Volcker Report Urges More Transparency at World Bank

20 September 2007

The new “Volcker Report,” critiquing the World Bank’s internal investigations unit, makes several recommendations in favor of greater transparency.

The report was commissioned to review the work of the Bank’s anti-corruption unit, the Department of Institutional Integrity (INT)-headed by Suzanne Rich Folsom, an appointee of former Bank President Paul Wolfowitz. The panel was chaired by former U.S. Federal Reserve Board chairman Paul Volcker.

The advantages of more disclosure crop up throughout the report but sometimes without much operational detail. For example, the report strongly urges the release of INT reports to the public but leaves the final decision to the Bank president. The panel recommends “action reports” following INT investigations, but does not address whether they should be disclosed.

Some of these matters may be considered by a new internal group established by President Robert Zoellick to prepare a response to the Volcker Panel report. Public comments are being accepted at http://go.worldbank.org/OTF87B0DL0.

Pro-Transparency Recommendations

A pro-transparency bias is evident throughout the panel’s report.

To detect corruption requires “transparent procedures” and “a robust whistleblower policy,” according to the report.

Paragraph 21, labeled “Detection,” states: “Projects and programs should be designed in such ways that detection and deterrence of corruption are more likely.” It goes on to recommend “transparent procedures, institutionally supportive attitudes, great sensitivity to corrupt behavior, a clear understanding of the obligation to report corrupt activity through appropriate and secure channels, and a robust whistleblower protection policy.”

However, the panel’s recommendations do not spell out more about what such transparent procedures entail.

Excessive Secrecy Seen

The report says that “INT at times acts in excessive secrecy” and suggests that “INT’s policies, practices and procedures should be transparent.” Much of the concern has to do with internal information-sharing, however, and not public disclosure specifically.

Stating the issue broadly in Paragraph 22, the Volcker panel identifies disclosure as a factor contributing to investigatory strength. Confidentiality for sources is important, the report says, adding that, “At the same time, INT cannot be effective without disclosure of its findings and procedures. There are questions in this area that need to be resolved to reinforce confidence in the investigative approach and the procedures of INT, including the relative emphasis in the use of its scarce resources on ‘reactive’ versus ‘proactive’ investigatory processes.”

The panel recommends that the Bank follow up its investigations with “action reports” and says the Managing Director should ensure these are reviewed periodically and in detail. The report is silent on the release of such reviews.

In Paragraph 51, the panel notes that “the Bank also must consider whether disclosure of INT’s redacted final report or the substance of its findings should be made to a wide constituency: the Executive Directors, government officials in the affected country, donors and funding partners, and the public.” This begins a series of sections on disclosure.

“In consideration of disclosure and other issues, the general question arises of the appropriate balance between INT’s need for confidentiality and the broader interests of disclosure,” the report states in Paragraph 59. Various disclosure proposals are made, but are not entirely clear about what should be released to the public. (The main focus in this section and in Paragraph 60 is with internal Bank staff communication.)

The paragraph continues: “There are important legitimate reasons for maintaining confidentiality, some of which relate to overall Bank disclosure policies. However, it is apparent to the Panel from its interviews of Bank personnel that INT at times acts in excessive secrecy. For example, INT does not disclose operating manuals to others in the Bank, even those portions of its manuals that would not jeopardize any investigative interest if disclosed. Such information may be relevant for those undergoing investigation or otherwise interacting with INT. The security arrangements surrounding INT’s office apparently are intimidating to some. The result is impairing INT’s ability to forge working relationships with Operations staff.”

More specifically, the Volcker panel recommends that appropriately-redacted INT reports be disclosed to Operations staff, to executive directors, to funding partners, and to borrowing countries.

The report in Paragraph 66 says: “The Bank has not given sufficient weight to the value of disclosing the results of INT investigations to relevant stakeholders. It has been clear to the Panel that this has resulted, in some cases, in information being withheld from parties with a clear interest at stake and a legitimate need to know. Such parties include members of the Board, the Bank’s funding partners (which may include trust fund donors, co-funding partners and parallel funding partners), and the responsible authorities within the borrowing country.”

On release to the public, the Volcker panel leaves it up the Bank president. The pertinent recommendation states: “Whether the redacted report should be disclosed to the public should be left to the discretion of the President, taking account of a strong presumption that the information should be made public.”

Another report critical of INT was issued recently by a U.S. nongovernmental organization, the Government Accountability Project.

Further information developments in this area are available on http://ifiwatchnet.org/?q=en/featured_blog/369.

By Toby McIntosh

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In this column, Washington, D.C.-based journalist Toby J. McIntosh reports on the latest developments in information disclosure in International Financial and Trade Institutions (IFTI).
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