Investments made by the European Investment Bank are wide open to abuse by fraudsters, money-launders and corrupt politicians, according to a damming new investigation by Counter Balance. Although, on paper, the Bank has controls in place to reduce the risk of fraud and corruption, the Bank’s policies are poorly policed and full of loopholes.
“The Bank claims to practice ‘zero tolerance to fraud and corruption policy”, says Xavier Sol, author of the report. “But, in reality, its anti-corruption regime is unfit for purpose. The EIB is simply not up to the task of tackling fraud and corruption. This significantly jeopardizes the soundness of European investments in and outside of Europe.”
The Counter Balance investigation found, under current EU law, the EIB is not even required to have in place anti-money laundering rules.
EU law also protects the EIB from legal challenge where its anti-corruption policies are broken or unenforced. No sanctions can be applied by the courts because the policies are not enshrined in law – they are merely 'internal rules' that are exercised at the EIB’s discretion.
“At a time when the public is crying out for an end to corruption, the EIB is permitted to operate in a hermetically-sealed bubble of discretion”, says Sol. “This has to end. The Bank must be accountable to the courts where it is found to have turned a blind eye to corruption”.
The Counter Balance report analyses four cases of EIB investments tainted by corruption (loans to Volkswagen group, Passante di Mestre and MOSE infrastructure projects in Italy, Sostanj coal power plant in Slovenia). It concludes that the EIB has a 'variable geometry approach' to fighting fraud and corruption and lacks a systematic and stringent way to deal with politically sensitive cases. These four investments alone saw €2.8 billion spent on corrupt projects.
Xavier Sol concludes:
“At a time when the EIB plans to become the ‘EU Climate Bank’ and to play a key role in a European Green Deal, we call on the EU institutions and EIB shareholders to do their utmost to enhance the control over the use of public funds.
It is high time to plug key loopholes and weaknesses which allow European public funding to be misused. A fundamental reform in the business model and practices of the EIB is necessary to make it more accountable and transparent, strengthen its resistance to corporate capture and accelerate its democratization.”