Transparency & Accountability • 14 Jan 2020
Reality check: On the European Bank's willingness to fight fraud
Guest article by Dr. Daniel Beizsley
(freelance researcher focusing on corporate crime
and organisational malpractice)
Over the last few months European Investment Bank (EIB) officials from the bank’s anti-fraud division have published 2 posts on the popular FCPA blog outlining steps the bank takes to prevent prohibited conduct in its operations and on its retroactive in-depth audits known as Proactive Integrity Reviews (PIRs).
Despite the best intentions of officials in the Fraud Investigations Division, it is no secret that the EIB has in the past financed projects affected by fraud and corruption. More controversially, at times EIB support has been extended even when the bank was aware of prohibited conduct beforehand.
As part of a European Commission funded PhD study, I have spent the last few years interviewing EIB officials to better understand shortcomings in internal EIB processes resulting in the bank supporting projects affected by fraud.
One of the study’s conclusions centres on the ways in which the EIB’s ability to fight fraud is hamstrung by a shortage of personnel within the Fraud Investigations Division – an issue acknowledged as much by the unit in its 2014 annual report.
In that year, the division counted on just 8 professional staff members who were charged with running 79 active fraud investigations as well as carrying out 2-3 PIRs, liaising with the bank’s compliance unit (OCCO), preparing referrals to the European Anti-Fraud Office (OLAF) and supervising the work of external consultants.
Since 2014, the division’s already excessive workload has become even more burdensome. The total number of open cases being worked on per year jumped from 224 in 2015 to 379 in 2018. Part of the explanation for this rise in case load is due to the EIB’s participation in the European Fund for Strategic Investments (EFSI) which since 2015 has led to the EIB appraising and financing more projects than ever before.
According to figures obtained from the EIB, the decision to expand its lending portfolio has not led to correspondent increases to the anti-fraud division’s headcount. In 2016, it had 14 officials before rising to just 20 in 2019. Hardly an adequate level to protect EIB operations from ever more sophisticated fraud and corruption risks.
Low staffing levels and the resultant effects on EIB anti-fraud capacity was a subject that often came up in discussions with EIB officials during my PhD research:
“The capacity is tiny, you can’t even call it significant. We thought that the court cases and media attention coming out of the investigations would warn other companies not to do the same. We rely on that to have a wider impact.” EIB Official interviewed in 2017
In public the EIB maintains its mantra of ‘zero-tolerance’ toward fraud and corruption but a closer look at its staffing levels highlight the EIB’s reluctance to apportion sufficient resources to keep their lending activities free from prohibited conduct. In 2018 the EIB recorded a surplus of €2.3 billion, an amount that makes its current level of support Fraud Investigations Division difficult to justify. The EIB can and should do better in this area.
Dr. Daniel Beizsley is a freelance researcher focusing on corporate crime and organisational malpractice. His PhD thesis on European Investment Bank lending in the EU adopts a multi-disciplinary approach to identify internal organisational shortcomings affecting the EIB’s ability to adequately appraise and take decisions on support for infrastructure projects.