It is essential for aid donors to combat scams, fraud, corruption, and other forms of misdemeanors to achieve the best value for money through their procurements processes which can help aid donors attain socioeconomic growth and tackle poverty.
Donors anticipate that their money will be spent wisely and ethically in order to further their goals. However, corruption, fraud, and scams involving aid funds can lead to money being misappropriated and ending up in the hands of corrupt people or organizations. This can lead to a reduction in funding for vital community-beneficial initiatives and services and therefore reduce the effect of aid.
To ensure scams and fraud are eliminated, organizations adopt due diligence procedures, establish fraud-fighting departments and create and maintain blacklists.
Donors and contractors working in international development can check whether a company has been blacklisted by a certain donor by searching that donor’s website or by looking this up on the biggest development sector database on the internet, www.developmentaid.org, which is so much easier.
Donors routinely place certain organizations on their ‘blacklists’ for a variety of reasons:
- Human rights infringements (forced labor, discrimination)
- Environmental infringements (illegal logging, pollution)
- Corruption (bribery)
- Fraud
- International sanctions violation
- International law violation among other illegalities
When a donor decides to put an organization on their blacklist they can choose not to donate to that company directly or via a charity that supports it. They might also decide to urge others to make the same choice by publicizing their decision to blacklist the organization.
In some instances, an entity might make an effort to alleviate the worries that prompted a donor to blacklist them. This can entail modifications to their practices or formal declarations of their commitment to resolving the problems at hand. Nevertheless, it is still up to the donor to choose whether or not to continue funding the organization.
What are the main justifications for donor sanctions on companies in international development? Let’s delve deeper into the data from the DevelopmentAid platform to find out!
What is the DevelopmentAid platform?
The DevelopmentAid platform is where donors can ensure they are up-to-date with information about blacklisted entities using a single database. Currently, the database shows that approximately 2,000 organizations have been blacklisted within the international development sector.
The majority of these organizations have been blacklisted by the World Bank (nearly 50%). The United Nations comes second, followed by governments, and the Inter-American Development Bank, and the African Development Bank.
Fig.1. Sanctioned firms by donors
It is worth mentioning that finding the right organization to collaborate with as a donor agency or as a consortium can sometimes be challenging, but being aware of the firms that are banned will help to make the best choice among numerous candidates.
Fig.2. Sanctioned firms by grounds
What does corrupt practice mean for donors?
The first justification for donor sanctions against almost 600 companies is corruption.
Corrupt practice, according to World Bank is defined as “the providing, obtaining, or requesting of something valuable, whether directly or indirectly, in order to illegally affect the behavior of another entity”.
Frequently, the corrupt practice involves giving bribes to gain a benefit, to have an impact on tender processes, to secure contracts, or to receive payments and be persuaded to award contracts to specific companies.
See also: What should a fair and effective tender process be like?
What does fraudulent practice mean?
DevelopmentAid data shows that over 300 organizations have been flagged by donors for fraud.
The World Bank defines the term fraudulent practice as any act or omission, such as misrepresentation, that intentionally or negligently seeks to deceive a party for the purpose of obtaining a financial advantage or escaping an obligation.
What is conditional non-debarment?
Over 240 companies are on a blacklist due to conditional non-debarment.
A conditional non-debarment allows a company that has admitted wrongdoing to continue to engage in commercial activity but it becomes subject to certain requirements.
This includes:
- Complete collaboration with the appropriate investigative body
- Adoption and successful execution of a company compliance program, frequently with the supervision of a contracted compliance specialist
What does the term unethical practices involve?
A total of 171 businesses have received penalties for unethical practices, according to DevelopmentAid.
A company’s behavior is considered unethical if it violates its staff or supplier code of conduct in a certain way which can involve a conflict of interest, gifts, hospitality, abuse of power, or harassment. These are actions that result in the violation of protocol or are morally offensive.
When discussing the tender process, any behavior on the behalf of the bidder that seeks to avoid the correct tender procedure in any way is considered to be unethical practice.
For example, following the opening of the initial bid, any unsolicited discount offers, discounted bid amount, etc., will be considered to be unethical behavior.
Companies linked to blacklisted entities can also be blacklisted too – with almost 100 sanctions on affiliates being recorded by DevelopmentAid.
Sanctions on affiliates relate to the application of restrictions or fines on businesses or people that are connected to an organization which has been singled out for sanctions. A total of 98 companies were sanctioned for being affiliated with or linked to a blacklisted organization, according to www.developmentaid.org.
Branches, parent organizations, and other entities with a close connection to a blacklisted company may be considered as its affiliates. The sanctions may be applied with the goal of limiting an affiliate’s business dealings with the blacklisted firm, exerting pressure on a specific organization, or preventing it from employing its affiliates as a means of circumventing the imposed sanctions.
Governments and international organizations frequently employ this tactic to strengthen the impact of sanctions and put pressure on the company so that it follows the established regulations.
Consulting companies working in the development sector, as well as individual experts and other contractors, should always be aware of the status of the company they engage with in an activity or invite to be part of consortia.
The information regarding blacklisted companies on the developmentaid.org website is available only to DevelopmentAid members. Click here to see all the sanctioned firms by donors in the international development sector.
