Editor’s Note (January 7, 2013): In response to IDB reaction to this blog post, the text of this blog has been edited slightly. For GAP’s full reaction to the IDB reaction, click here.

On October 31, 2012, the Inter-American Development Bank (IDB) announced the release of a revised whistleblower protection policy and Code of Ethics and Professional Conduct. Although the IDB claims that its new whistleblower policy maintains “alignment with international best practices,” in reality the policy violates all best practice cornerstones, as detailed in GAP’s review.

In December 2011, President Obama signed into law the U.S. 2012 Consolidated Appropriations Act. According to this law, the U.S. Treasury Department must certify that the IDB is “making substantial progress” toward “implementing best practices for the protection of whistleblowers from retaliation, including best practices for legal burdens of proof, access to independent adjudicative bodies, results that eliminate the effects of retaliation, and statutes of limitation for reporting retaliation,” before the Congress will disburse funds to the IDB for its General Capital Increase.

Unfortunately, despite some minor advances, the revised policy does not fully meet any of these standards. According to GAP Legal Director Tom Devine, “this policy cleanly flunks all relevant criteria for a lawful appropriation to the Bank.” The IDB’s policy also fails to adopt several recommendations made by Global Compliance, the company that the IDB hired to review its ethics system.

Key shortcomings include:

  • Flawed burden of proof: Although the burden of proof initially appears to meet best practice standards, it is severely undermined by loopholes, including those in sections 2.4.2 and 2.4.5.
  • Lack of independent adjudicative bodies: The U.S. 2006 Foreign Operations, Export Financing and Related Programs Appropriations Act requires the U.S. Executive Director at the Bank to advocate for “access to independent adjudicative bodies, including external arbitration based on consensus selection and shared costs” in whistleblower cases. The revised policy does not provide external arbitration and therefore cannot be endorsed by the U.S. director. On an appellate level, the IDB Administrative Tribunal cannot be credibly described as “independent.” The Tribunal is internal to the IDB, and its judges are paid for and appointed by the institution. Moreover, the policy permits the Office of Ethics to refer the retaliation complaint for resolution to whomever it deems as “the appropriate authorities.” This means that there is no guarantee of independent due process. On the contrary, under this policy, structural conflicts of interest persist: the institution itself (which is also the accused in a whistleblower’s retaliation claim) serves as initial judge and jury of its own misconduct. 
  • Failure to provide a make-whole remedy: The policy does not require that the effects of retaliation be eliminated. The policy only includes Ethics Office recommendations for necessary relief, not the right to be made whole.
  • Deficient statute of limitations: According to GAP’s best practices list, which was developed by reviewing whistleblower policies around the world, six months is the minimum functional statute of limitations for whistleblowers to become aware of or act on their rights. One-year statutes of limitations are consistent with common law rights and are preferable. An IDB whistleblower with a formal grievance is required to observe a 90-day deadline for filing a formal grievance with the Administrative Tribunal. Moreover, according to the new Code of Ethics, reporting of misconduct should be done “no later than three business days after learning of or developing” a suspicion about misconduct. In the absence of credible, enforceable whistleblower protections, employees may be hesitant to report misconduct and are unlikely to comply with the three day deadline. In contrast, the United Nations whistleblower protection policy protects whistleblowers who make disclosures up to six years after the individual becomes aware of the misconduct.
  • Lack of comprehensive protection for lawful public disclosures: The 2006 Foreign Operations, Export Financing and Related Programs Appropriations Act also requires the U.S. Executive Director to advocate for the implementation of “best practices in domestic laws and international conventions against corruption for whistleblower and witness disclosures and protections against retaliation for internal and lawful public disclosures …” (emphasis added) The IDB’s policy does not meet this standard. In addition, the policy fails to adhere to several recommendations made by Global Compliance in this regard. For example, Global Compliance recommended that whistleblowers who go outside the Bank be protected “if they have already made an internal report, but have not received any status of the matter for a time period exceeding six months,” a provision that exists in most Intergovernmental Organization (IGO) whistleblower policies, but not in the IDB’s. The policy also provides contradictory guidance regarding confidentiality obligations, further increasing the chilling effect against external disclosure.
  • Failure to protect the whistleblower’s identity and other confidentiality concerns: The best practice is that the whistleblower’s identity or identifying information should not be disclosed without his or her express written permission, unless there is an imminent threat to public health or safety from corruption, in which case there should be reasonable prior written notice afforded to the person who made the disclosures. The new policy does not meet this standard, as it allows the Bank to disclose identifying information without restriction, as well as broad discretion to reveal the whistleblowers’ actual identity without obtaining his or her permission first. The policy does not even provide advance notice or warning to the whistleblowers that their identities are about to be revealed. In this instance, the Bank weakened its 2010 policy, which provided stronger confidentiality guarantees, and moved away from best practices in place at other IGOs. Based on this modification, all whistleblowers fearful of retaliation should not work within the IDB Policy. The only safe alternative for them is to act outside of Bank channels. 

Additional weaknesses in the policy include, but are not limited to: a loophole in the retaliation definition; the failure to specify how interim relief will be granted; and the failure to fully act on Global Compliance’s recommendation to address potential conflicts of interest. These weaknesses, as well as a few minor advances, are detailed in more depth in GAP’s review here.

According to Bank President Luis Alberto Moreno, the IDB’s “work has an even greater impact when we do not simply prescribe good governance to others, but hold ourselves to those same high standards.” Unfortunately, the IDB’s new whistleblower protection policy sets the pace for the lowest standard among existing Multilateral Development Bank whistleblower policies.

A 2007 survey by PricewaterhouseCoopers of more than 5,400 corporations worldwide found that whistleblowers were the initial means of detecting economic crimes in 43 percent of cases, more than corporate security, internal audits, fraud risk management and law enforcement combined. Failure to implement a strong whistleblower protection policy demonstrates a lack of political will to stop internal fraud from happening. In the absence of a strong whistleblower protection policy, fraudulent activities and other misconduct could continue unabated at the IDB, causing significant damage to the Bank’s operations.

Shelley Walden is International Officer for the Government Accountability Project, the nation’s leading whistleblower protection and advocacy organization.