## PROGRESS IN IMPLEMENTING THE FRAMEWORK FOR ENHANCED FUND ENGAGEMENT ON GOVERNANCE (ppea2020033)

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---

### Executive summary — overview and major implementation findings
- Interim update on implementation of the 2018 Framework for Enhanced Fund Engagement on Governance.
- Update provided in advance of a comprehensive formal review scheduled for mid-2021.
- Date on document: June 25, 2020.
- Major implementation findings:
  - A new centralized process systematically analyzes governance and corruption vulnerabilities for all Fund members.
  - Text mining indicates governance-related terms in staff reports have increased by more than four-fold relative to the average over 2008-17.
  - References to governance have risen across all types of countries and become more correlated with governance weaknesses; word counts cannot assess changes in the quality or traction of staff advice.
  - Qualitative analysis suggests deeper discussions on governance and anti-corruption issues in Article IV reports, often via Selected Issues papers or detailed annexes.
  - Fund-supported programs have leveraged the Framework to design specific conditionality related to governance and anti-corruption reforms; governance improvements are now a core objective of many programs.
  - Technical assistance and training to assist countries in strengthening governance and anti-corruption efforts is being stepped up, including governance diagnostic missions.
  - Increased analytical work, outreach to the public and civil society, and collaboration with other international organizations on governance issues.
  - So far 10 advanced economies have participated in the voluntary assessment of their efforts to address transnational corruption (criminalizing bribery of foreign officials and preventing concealment of proceeds of corruption).

### Centralized institutional process
- Centralized process established to systematically assess governance and corruption vulnerabilities for all 189 Fund members.
- Led by a cross-departmental working group of senior IMF staff; identifies which of the six state functions warrant in-depth discussion:
  - (i) fiscal governance;
  - (ii) financial sector oversight;
  - (iii) central bank governance and operations;
  - (iv) market regulation;
  - (v) rule of law;
  - (vi) anti-money laundering and combating the financing of terrorism (AML/CFT).
- Process analyzes whether the anti-corruption framework warrants discussion and establishes the broad scope and timing of governance coverage in Article IV consultations within a three-year timespan.
- Centralized assessments rely on quantitative and qualitative inputs, drawing on existing Fund activities, discussions with authorities, and, where warranted, information from other institutions, especially the World Bank.
- Centralized assessments have now been conducted at least once for all Fund members.
- Departments collaborate post-assessment (including interdepartmental brainstorming sessions) to enhance specificity and effectiveness of staff advice; more than 50 brainstorming meetings on governance with participation of functional departments and, in many cases, World Bank staff have taken place so far.
- Area departments have established internal processes (examples cited: AFR internal guidance note and AFR Governance Group; MCD governance working group).

### Resource implications and capacity development
- Increase in governance-related work estimated at $6 million per year as implementation reached steady state before the crisis.
- Budgetary resources allocated to functional departments: $2.4 million in FY20 and $1.9 million in FY21 (gross terms); remainder covered through reallocations and prioritization.
- Anti-corruption CD work targeted to increase from 1.1 percent of total CD delivery in FY19 to 1.8 percent of total in FY23, or around $4½-5 million in total.
- Anti-corruption CD work defined narrowly and does not include most broader governance-related CD (e.g., fiscal governance, financial sector oversight, central bank governance).

### Coverage of governance and corruption issues in staff reports — text mining and quantitative findings
- Text mining methodology: examined references to “corruption,” “governance,” and “bribery” in 9,185 staff reports over 1979–2019 (including Selected Issues papers); adjusts for report length in normalized frequency counts for 1991–2019.
- Limitations: frequency measures do not capture quality, specificity, or traction of advice; does not include other relevant terms (examples: “related-party,” “regulatory capture,” “beneficial owner,” “politically exposed persons”).
- Key quantitative observations:
  - Governance-related references more than doubled in Fund staff reports in the 18 months following the Board’s approval of the Framework in April 2018 compared with the level in 2017.
  - In 2019, governance-related references were over four times more frequent than the average over the decade preceding the Framework’s adoption.
  - At least 80 percent of staff reports had at least one reference to “corruption” in 2019.
  - Governance-related terms have increased, on average, in all country groups by level of development, program/surveillance activity, area department, and level of perceived corruption.
  - In absolute terms, increases are highest for low- and middle-income countries.
  - References have also increased substantially (more than doubled) for advanced economies.
- Correlation with perceived control of corruption:
  - Preliminary evidence indicates frequency of governance-related terms correlates more strongly with perceived corruption than in the past.
  - Correlations calculated annually using: (i) a rescaled version of the WGI Control of Corruption Indicator (0 (100) indicating the lowest (highest) level of perceived corruption); and (ii) the logarithm of countries' normalized frequency count of the words "corruption" and "governance" in staff reports.
  - Countries with the weakest control of perceived corruption tend to have more governance-related references, but discussions also intensified in countries where perceptions of corruption are less pronounced.
  - Control of Corruption quartiles based on countries’ average score over 2005–18.

### Staff engagement: surveillance, use of Fund resources, and analytical work
- Surveillance:
  - Governance vulnerabilities are included in surveillance when they significantly affect a member’s present or prospective balance of payments or domestic stability.
  - Specificity and timing of governance inclusion guided by nature and perceived urgency of the weakness; Selected Issues Papers (SIPs) and annexes often support in-depth discussions.
- Use of Fund resources (programs):
  - Reforms to address governance vulnerabilities and corruption risks are included as conditionality when they are critical to achieving program goals, consistent with the Guidelines on Conditionality.
  - Several new programs explicitly foreground the fight against corruption in core objectives: Angola, Central African Republic, Equatorial Guinea, Honduras, Liberia, Mali, Pakistan, Rep. of Congo, Sierra Leone, and Ukraine.
  - Corruption-related measures have featured as structural benchmarks and/or prior actions in these programs.
  - In existing programs where governance is critical, the Framework has led to more specific and concrete conditionality (examples: Guinea and Malawi).
  - Governance and anti-corruption measures have appeared as policy commitments in MEFPs supporting program goals (example: Cameroon on Extractive Industries Transparency Initiative principles and AML/CFT measures related to PEPs and beneficial ownership).
- Analytical work and strategic communications:
  - Increased analytical outputs, outreach to the public and civil society, and collaboration with other international organizations on governance issues.
  - Staff developing internal notes on anti-corruption subjects (anti-corruption agencies; UNCAC requirements; rule of law; financial asset disclosure by public officials).
  - A Fund-wide knowledge exchange website with good practices and case studies is being set up.

### Emergency financing (COVID-19) and governance safeguards
- Emergency financing delivered in upfront, outright disbursements limits scope for traditional conditions; staff seeks enhanced governance measures without unduly delaying disbursements.
- Measures adopted to reduce misuse of funds:
  - Staff assesses public financial management, anti-corruption, and AML measures that can be requested without unduly delaying disbursements; specific commitments normally include audits and transparency in procuring goods and services.
  - Variations of these commitments have been included for the large majority of countries receiving emergency IMF assistance related to the COVID-19 crisis.
  - All countries receiving emergency financing must commit to undertaking a "Safeguards Assessment" (unless recently conducted).
  - Where severe governance vulnerabilities are identified, governance-related prior actions have been used (central bank safeguards, procurement transparency, key PFM measures).
  - Many emergency-assistance recipients already have or will seek multi-year arrangements better suited to addressing longer-term governance issues; staff will include governance and anti-corruption measures in these programs.
- Key commitments commonly found in authorities’ Letters of Intent for COVID-19 emergency financing:
  - Undertake and publish an audit of crisis-related spending, typically by the country’s supreme audit institution or a third-party auditor where capacity/independence is lacking.
  - Publish crisis-related procurement contracts on the government’s website, identifying companies awarded contracts and their beneficial owners, and recording ex-post validation of delivery of services and products.
  - Country teams consult World Bank governance practice experts to tailor procurement-related commitments.
  - One or both commitments included in the vast majority of emergency financing for countries previously assessed to have significant corruption risks or governance vulnerabilities.
- Historical context cited: during the 2014–2016 Ebola outbreak in West Africa, financial irregularities were found in 37 percent of US$8 million of government spending funded by the Ebola Trust Fund in Liberia.

### Annex V — COVID-19 LOI commitments: transparency, procurement, audits, PFM, and AML/CFT
- Transparency and regular reporting:
  - Many LOIs commit to publishing regular reports on pandemic-related spending; examples with frequencies include quarterly, monthly, and monthly/quarterly combinations across multiple countries.
  - Selected country reporting commitments listed explicitly (e.g., Afghanistan — quarterly reports; Bahamas — quarterly reports; Democratic Republic of Congo — publish treasury plan budget execution figures monthly).
- Procurement transparency and beneficial ownership disclosure:
  - Many LOIs require publishing COVID-19 procurement contracts, often including names of awarded companies and beneficial owners and, in some cases, full contract text and ex-post validation.
  - Country-specific thresholds and timing examples preserved exactly:
    - Democratic Republic of Congo: publish online all COVID-19 related procurement contracts that exceed US$12,000 and disclose beneficial ownership for contracts exceeding USD 1 million.
    - Djibouti: publish procurement contracts of COVID-19 expenditures in excess of US$100,000.
    - Liberia: publish procurement contracts above US$200,000 for goods, above US$400,000 for works, and above US$100,000 for services.
    - Myanmar: publish contracts above Kyat 100 million within 3 months of being signed.
    - Uganda: publish contracts above Ush500 million for works and Ush200 million for goods and services, together with names of awarded companies and their beneficial owners.
  - Commitments to modernize procurement frameworks and laws cited (examples: Bahamas, Uzbekistan, Kyrgyz Republic).
- Audit commitments and ex-post reviews:
  - Wide-ranging commitments to undertake independent, ex-post, or external audits with specified timelines preserved exactly where given (examples include Afghanistan — publish audit reports by end-December; Bahamas — audited within 9 months of the end of the fiscal year; Bangladesh — audit within 12 months).
  - Examples of named auditors/entities are preserved exactly (Supreme Audit Office; Auditor General; Office of the Comptroller General; Court of Accounts; General Audit Commission; National Audit Office; Office of the Auditor General, etc.).
  - Many LOIs commit to publish ex-post validation of delivery alongside audit results and procurement documentation.
- Public financial management, budgeting, and safeguards:
  - Commitments to keep emergency spending on-budget, apply budgetary procedures and controls, and use Treasury Single Account (TSA) arrangements in several LOIs (examples: Cameroon; Gambia; Jordan; Uzbekistan; Democratic Republic of Congo).
  - Use of reporting mechanisms and earmarking examples preserved (Grenada; Papua New Guinea).
- Anti-corruption, AML/CFT, and governance reforms:
  - LOIs link emergency financing to broader governance, anti-corruption, and AML/CFT improvements with country-specific commitments preserved (examples: El Salvador; Myanmar; Nigeria; Montenegro).
  - Institutional measures and task forces highlighted (examples: Tajikistan — Inter-agency Task Force; Sierra Leone — COVID-19 Response Transparency Taskforce; Papua New Guinea — State of Emergency Controller posting procurement details).

### Capacity Development (CD): focus, modalities, and diagnostic missions
- CD is a key element of the Framework, focused on ex-ante (diagnostics) and ex-post (implementation) support.
- Prioritization discussed in the Committee on Capacity Building (CCB); since FY19, the CCB identified anti-corruption as a growth area.
- Prioritization of CD interventions considered in the context of the Resource Allocation Plan and varies by country demand and identified vulnerabilities.
- Areas and modalities of CD delivery:
  - Enhanced CD addresses central bank governance and operations; financial sector oversight; fiscal governance; AML/CFT.
  - Fiscal governance CD supports fiscal transparency and public financial management (PFM); example: FAD remote CD for Honduras following a June 2019 diagnostic to address trust funds’ vulnerabilities to corruption.
  - Central bank CD focuses on independence, decision-making, internal organization, internal controls, accounting standards, and reporting.
  - MCM provides CD via long-term experts, peripatetic short-term experts, Financial Sector Stability Reviews (FSSR), and about 20 CD missions per year on central bank governance issues.
  - Since 2014, CD provided to some 58 recipient countries in all area departments.
- Governance diagnostic missions:
  - Ten joint diagnostic missions conducted to date, primarily in a program context.
  - Diagnostic missions perform a “deep dive” into corruption vulnerabilities and set out a prioritized engagement strategy.
  - Ten countries covered by diagnostic missions (preserved exactly):
    - Central African Republic;
    - Democratic Republic of Congo;
    - Equatorial Guinea;
    - Honduras;
    - Guinea-Bissau;
    - Mozambique;
    - Republic of Congo;
    - Paraguay;
    - Peru;
    - Zimbabwe.
  - In most cases, authorities have published key diagnostic results or disclosed an IMF TA report; published reports exist for Republic of Congo, Equatorial Guinea, Mozambique, and Central African Republic.
  - Diagnostic reports contributed materially to program design; sometimes reforms implemented prior to conclusion of program discussions.
- Virtual CD during the COVID-19 crisis:
  - Overall CD delivery slowed, but virtual governance diagnostics and TA continued in several cases (examples preserved exactly): LEG to Equatorial Guinea; LEG to Pakistan; virtual support to Sierra Leone, Georgia; FAD remote CD for Honduras.
  - Preparatory work to enable virtual governance diagnostics is being undertaken in HQ.

### Outreach, civil society engagement, innovation, and collaboration
- Outreach and communications program includes management speeches, flagship events, bilateral meetings, and factsheet updates.
- Engagement with civil society organizations (CSOs) enhanced:
  - CSOs provide insights and support Fund recommendations (example: anti-corruption reforms in Ukraine).
  - Fund staff met with CSOs for all governance diagnostics and often consult with them for surveillance and program missions.
  - COM organized periodic roundtables with diverse CSOs.
  - Some CSOs (e.g., Transparency International and Human Rights Watch) provide external assessments of Fund actions on governance issues.
  - CSO feedback: pleased the Fund stepped up governance coverage but requested stronger evenhandedness and collaboration.
- Innovation and outreach initiatives:
  - Anti-Corruption Challenge launched at the iLab during the 2019 Annual Meetings attracted over 120 proposals; eight teams selected to move forward with seed funding support from Swiss authorities.
- Collaboration with other international institutions:
  - World Bank: periodic meetings and integration of Bank analysis and reports (e.g., CPIA, Doing Business, procurement and PPP reports, SOE expertise) into Fund assessments; World Bank staff attend brainstorming sessions and participate in diagnostic missions; World Bank is a partner in the Anti-Corruption Challenge.
  - UNODC: provides Secretariat support, Implementation Review Mechanism outputs, TA, and country reports used in Fund work.
  - OECD: OECD Anti-Bribery Convention and OECD Working Group on Bribery monitoring materials form the basis for coverage of supply-side corruption in Article IV reports.
  - FATF: mutual evaluation reports and AML/CFT standards used to assess concealment of proceeds of corruption.
  - Financial Stability Board and other standard setters: coordination on tools related to financial sector oversight (e.g., Corporate Governance Principle for Banks; Core Principles for Effective Banking Supervision).

### Surveillance case examples and selected program cases (high-level remedies and conditionality)
- Selected surveillance cases with high-level remedies recommended (preserved country examples and recommendations):
  - Bulgaria (2019 Article IV and SIP): strengthen anti-corruption framework, fiscal governance, asset declaration verification, SOE management.
  - Djibouti (2019 Article IV and SIP): strengthen public procurement, adopt TSA, expand SOE audit coverage, judiciary capacity, PEPs/beneficial ownership, FIU-anti-corruption cooperation.
  - Malaysia (2019 Article IV; 2020 update): legislative reforms for public investment management and SOE oversight, extend asset declaration coverage, beneficial ownership, independence of anti-corruption commission, freedom of information, political financing reforms; noted launch of National Anti-Corruption Plan in January 2019.
  - Mexico (2019 Article IV): centralize and digitalize public procurement, implement anti-corruption constitutional reforms, enhance beneficial ownership transparency, strengthen rule of law and judicial capacity, improve financial sector supervision.
  - Nigeria (2019 Article IV): technology in tax administration, remove tax exemptions, extractive industry contract transparency, beneficial ownership transparency, asset declaration regime for PEPs and SOE executives, strengthen AML/CFT supervision and governance reforms across policy areas.
- Selected cases of transnational corruption in Article IV consultations (examples preserved exactly):
  - United Kingdom — 2018 Article IV: corporate transparency and verification for PSC register; strengthen SFO and foreign bribery enforcement; recommendations on interagency cooperation, AML reporting, and HMRC capacity.
  - United States — 2019 Article IV: "substantially effective" at investigating and prosecuting money laundering; Department of Justice Kleptocracy Asset Recovery Initiative restrained US$2.8 billion in assets and repatriated over US$150 million since 2010; December 2017 Executive Order resulted in 66 corruption-related designations as of May 16, 2019; identified gaps on beneficial ownership, customer due diligence, and AML coverage for certain professions and sectors.

### Annex IV — Examples of Fund-supported programs with governance and anti-corruption conditionality
- Republic of Congo (three-year ECF program, approved July 2019):
  - Pre-approval reforms included mandatory publication of audited financial statements of the state-owned oil company and laws establishing an anti-corruption commission, a transparency commission, and asset declaration requirements for senior officials.
  - Prior actions included submission to Parliament of three reports and publication of KPMG reconciliation reports.
  - Structural benchmarks included adopting implementing decrees for the new commissions and submission of a new anti-corruption law designed to ensure full compliance with UNCAC.
- Honduras (two-year SBA/SCF program):
  - Governance diagnostic mission at program outset; structural benchmarks across fiscal governance, AML/CFT, and anti-corruption apparatus (creation of PPP unit; enhanced procurement platform; centralized beneficial owner register; improved asset declaration system).
- Pakistan (three-year EFF, approved July 2019):
  - Priorities: strengthen anti-corruption institutions, improve SOE governance and central bank governance.
  - Measures include public asset declaration system for high-level officials, UNCAC implementation review, domestic assessment of anti-corruption institutions, SOE law and triage of SOEs (end-September 2020 structural benchmarks), and SBP Act amendments to strengthen autonomy and governance.
- Moldova (EFF/ECF-supported program):
  - Rehabilitated the banking system, secured bank shareholder transparency via fitness and probity, improved supervisory frameworks, unwound related-party exposures, strengthen AML/CFT and anti-corruption frameworks.
- Sri Lanka (three-year EFF program approved June 2016; subsequent reviews addressed governance):
  - Structural benchmarks and measures targeted SOE governance, fiscal transparency (GFSM alignment), anti-corruption legal measures (National Action Plan; amended bribery act July 2018), new courts for bribery and corruption cases, AML/CFT steps to exit FATF grey list, and central bank governance via a new Central Bank Act.

### Remaining challenges and next steps; stocktaking and formal review
- Continued efforts needed to support Framework implementation; key challenges include:
  - Ensuring sustained engagement by the Fund: governance progress expected to be gradual; continued dedication of area and functional department resources and Board and management commitment required.
  - Building ownership and sustained efforts by country authorities: political will can be difficult to foster; better engagement when staff provide practical, granular solutions, engage early, explain evenhandedness, sequence discussions, conduct outreach, and follow-up on implementation.
  - Supporting country teams: need HQ-based brainstorming, in-field mission support, governance diagnostic missions, expertise maintenance, knowledge management, regular in-reach and training, and a knowledge exchange website.
  - Filling data gaps: data coverage differs across countries; leverage prior TA, safeguards assessments, FSAP/FSSR, AML/CFT assessments, and other institutions’ work; initiatives include analytical work on big data and upcoming policy work on informality and illicit financial flows; Anti-Corruption Challenge includes measurement of corruption risks.
  - Securing additional volunteers for assessing transnational aspects: so far only G7 countries, Austria, the Czech Republic, and Switzerland volunteered; further volunteers needed.
  - Tracking authorities’ commitments under rapid instruments: monitoring implementation of RFI/RCF commitments during the Covid-19 crisis will require enhanced engagement; non-implementation may lead to governance-related conditionalities under upcoming programs or surveillance advice.
- Stocktaking and formal review:
  - Comprehensive in-depth stocktaking planned in the formal review of the Framework scheduled for mid-2021.
  - Review will be consultative, cover implementation across the membership, and assess progress toward more systematic, effective, candid, and evenhanded engagement on macro-critical governance vulnerabilities.

*Source: ppea2020033 - EXECUTIVE SUMMARY and selected sections (June 25, 2020).*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Overview
- This paper provides an interim update on implementation of the 2018 Framework for Enhanced Fund Engagement on Governance.
- The update is in advance of a comprehensive formal review of the Framework scheduled for mid-2021.
- Date on document: June 25, 2020.

### Major implementation findings
- Implementation of the Framework is well underway, with multiple operational and analytical changes in place.
- Key observed outcomes include:
  - A new centralized process to systematically analyze governance and corruption vulnerabilities for all Fund members.
  - Text mining indicates governance-related terms in staff reports have increased by more than four-fold relative to the average over 2008-17.
  - References to governance have risen across all types of countries and become more correlated with governance weaknesses, though word counts cannot assess changes in the quality or traction of staff advice.
  - Qualitative analysis suggests deeper discussions on governance and anti-corruption issues in Article IV reports, often via Selected Issues papers or detailed annexes.
  - Fund-supported programs have leveraged the Framework to design specific conditionality related to governance and anti-corruption reforms; governance improvements are now a core objective of many programs.
  - Technical assistance and training to assist countries in strengthening governance and anti-corruption efforts is being stepped up, including governance diagnostic missions.
  - Increased analytical work, outreach to the public and civil society, and collaboration with other international organizations on governance issues.
  - So far 10 advanced economies have participated in the voluntary assessment of their efforts to address transnational corruption (criminalizing bribery of foreign officials and preventing concealment of proceeds of corruption).

### Centralized institutional process
- A centralized process has been established to systematically assess governance and corruption vulnerabilities for all 189 Fund members.
- The process is led by a cross-departmental working group of senior IMF staff and identifies which of the six state functions warrant in-depth discussion:
  - (i) fiscal governance;
  - (ii) financial sector oversight;
  - (iii) central bank governance and operations;
  - (iv) market regulation;
  - (v) rule of law;
  - (vi) anti-money laundering and combating the financing of terrorism (AML/CFT).
- The process also analyzes whether the anti-corruption framework warrants discussion and establishes the broad scope and timing of governance coverage in Article IV consultations within a three-year timespan.
- Centralized assessments rely on quantitative and qualitative inputs, drawing on existing Fund activities, discussions with authorities, and, where warranted, information from other institutions, especially the World Bank.
- Centralized assessments have now been conducted at least once for all Fund members.
- Departments collaborate post-assessment (including interdepartmental brainstorming sessions) to enhance the specificity and effectiveness of staff advice; more than 50 brainstorming meetings on governance with participation of functional departments and, in many cases, World Bank staff have taken place so far.
- Area departments have established internal processes (examples: AFR internal guidance note and AFR Governance Group; MCD governance working group).

### Resource implications and capacity development
- As implementation was reaching steady state before the crisis, the increase in governance-related work was estimated at $6 million per year.
- Budgetary resources allocated to functional departments: $2.4 million in FY20 and $1.9 million in FY21 (gross terms); remainder covered through reallocations and prioritization.
- Anti-corruption CD work is targeted to increase from 1.1 percent of total CD delivery in FY19 to 1.8 percent of total in FY23, or around $4½-5 million in total.
- Anti-corruption CD work here is defined narrowly and does not include most broader governance-related CD (e.g., fiscal governance, financial sector oversight, central bank governance).

### Coverage of governance and corruption issues in staff reports
- A text mining analysis examined references to “corruption,” “governance,” and “bribery” in Fund staff reports (methodology covers 9,185 staff reports over the period 1979–2019, including Selected Issues papers).
- Limitations: text mining captures frequency of terms but does not capture the quality, specificity, or traction of advice; it does not include other relevant terms related to the six state functions (examples cited: “related-party,” “regulatory capture,” “beneficial owner,” “politically exposed persons”).
- Key quantitative observations:
  - Governance-related references more than doubled in Fund staff reports in the 18 months following the Board’s approval of the Framework in April 2018 compared with the level in 2017.
  - In 2019, governance-related references were over four times more frequent than the average over the decade preceding the Framework’s adoption.
  - At least 80 percent of staff reports had at least one reference to “corruption” in 2019.
  - Governance-related terms have increased, on average, in all country groups by level of development, program/surveillance activity, area department, and level of perceived corruption.
  - In absolute terms, increases are highest for low- and middle-income countries.

### Staff engagement areas (surveillance, use of resources, analytical work)
- Surveillance:
  - Governance vulnerabilities are included in surveillance if they significantly affect a member’s present or prospective balance of payments or domestic stability.
  - Specificity and timing of governance inclusion are guided by the nature and perceived urgency of the weakness.
- Use of Fund resources (programs):
  - Reforms to address governance vulnerabilities and corruption risks are included as conditionality in Fund-supported programs when they are of critical importance for achieving program goals.
- Capacity development:
  - Governance diagnostic missions undertake detailed analysis of governance weaknesses and propose prioritized solutions.
  - Virtual CD modalities are being used (referenced in broader content).
- Analytical work and strategic communications:
  - Much work is being done to produce analytical work, outreach to public and civil society, and collaboration with other international organizations on governance issues.

### Remaining challenges and next steps
- Continued efforts needed to support Framework implementation; key challenges include:
  - Ensuring sustained engagement by the Fund.
  - Building further ownership and efforts by country authorities.
  - Supporting country teams in complex governance discussions.
  - Filling data gaps.
  - Securing additional volunteers for assessment of transnational aspects of corruption.
- A formal review of the Framework is scheduled for mid-2021 to comprehensively assess progress toward promoting more systematic, effective, candid, and evenhanded engagement on macro-critical governance vulnerabilities.

*Source: ppea2020033 - EXECUTIVE SUMMARY (June 25, 2020).*

### references have also increased substantially (more than doubled) for advanced economies.

### ppea2020033 - references have also increased substantially (more than doubled) for advanced economies.

### Trends in governance-related coverage in IMF staff reports
- The normalized frequency counts governance-related terms ("corruption," "governance," and "bribery") in IMF staff reports issued to the Executive Board over the period 1991–2019, adjusting for report length.
- References to governance-related terms have increased across all country groups by level of development, with relatively large increases in staff reports on LIDCs and EMs.
- The absolute number of references has increased most in AFR and MCD, reflecting differences in country composition, but increases have picked up noticeably in APD, EUR, and WHD as well.
- Surveillance and program staff reports saw similarly sized increases and have followed similar trends over time.
- Time windows and benchmarks used in figures and comparisons include: 1991–2019 (overall series), Average 2008-17 versus Average 2018-19 (comparisons shown in frequency charts), and a normalized index with Average 2008-17 = 100.

### Correlation with perceived control of corruption
- Preliminary evidence indicates the frequency of governance-related terms in staff reports correlates with perceived corruption more strongly than in the past.
- Correlations are calculated annually using: (i) a rescaled version of the WGI Control of Corruption Indicator, with 0 (100) indicating the lowest (highest) level of perceived corruption; and (ii) the logarithm of countries' normalized frequency count of the words "corruption" and "governance" in staff reports. A correlation coefficient can take values between 0 and 1.
- Countries with the weakest control of perceived corruption tend to have more governance-related references in Fund staff reports, but discussions also intensified significantly in countries where perceptions of corruption are less pronounced.
- Control of Corruption quartiles are based on countries’ average score over the period 2005–18; first quartile countries have the lowest level of perceived corruption and fourth quartile countries have the highest.

### Effects of the 2018 Framework on staff engagement and report content
- Text-mining results serve as a preliminary indication that the Framework has affected staff reports: discussions with member countries on governance and corruption issues have become more candid and increased across the Fund’s membership, with coverage more closely correlated with the level of perceived governance weaknesses.
- The Framework supports deeper and more candid discussions in surveillance where governance issues are judged macroeconomically critical, in line with the Integrated Surveillance Decision that governance weaknesses be addressed when they "significantly influence present or prospective balance of payments and domestic stability."
- Severe governance weaknesses are judged macroeconomically critical based on centralized assessments that rely on quantitative and qualitative inputs.

### Surveillance: domestic and transnational aspects
- Domestic aspects: country teams are undertaking more in-depth discussions in Article IV consultations and proposing more concrete governance and anti-corruption recommendations. Modalities of staff engagement vary by significance of vulnerabilities; Selected Issues Papers (SIPs) and annexes often support these discussions.
- Governance vulnerabilities discussed include fiscal governance, central bank governance and operations, financial sector oversight, market regulation, contract enforcement and property rights, AML/CFT, and anti-corruption frameworks. Examples cited: Bulgaria, Djibouti, Malaysia, South Africa, Liberia, Mozambique, Cambodia, India, Zimbabwe, Nigeria, Malta, Mexico, Moldova.
- Transnational aspects: the Fund has urged members to volunteer for assessments of anti-bribery frameworks and AML/CFT aspects that curb concealment of proceeds of corruption. Ten countries have volunteered to be assessed thus far.
  - Article IV staff reports published between 2018 and 2020 addressed:
    - foreign-bribery issues for France, Germany, and Japan;
    - AML issues for the United States;
    - both areas for Switzerland, Canada, the Czech Republic, and the United Kingdom.
  - Assessments draw on: the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and FATF AML/CFT standards. For OECD signatories, assessments rely on OECD monitoring; for other members, assessments are based on the peer review under UNCAC.
- The focus on transnational aspects supports evenhandedness across the membership and recognizes corruption as a global problem.

### Use of Fund resources and program design
- Fund-supported programs are leveraging the 2018 Framework in design; governance-related conditionality is included when governance vulnerabilities are critical to achieving program goals, consistent with the Guidelines on Conditionality.
- Support to country teams is provided by functional departments through HQ-based backstopping, participation in missions, and technical assistance.
- Several new programs explicitly foreground the fight against corruption in core objectives: Angola, Central African Republic, Equatorial Guinea, Honduras, Liberia, Mali, Pakistan, Rep. of Congo, Sierra Leone, and Ukraine. Corruption-related measures have featured as structural benchmarks and/or prior actions in these programs.
- In existing programs where governance is critical, the Framework has led to more specific and concrete conditionality and advice (examples include Guinea and Malawi).
- Governance and anti-corruption measures have also appeared as policy commitments in MEFPs supporting program goals (example: Cameroon on Extractive Industries Transparency Initiative principles and AML/CFT measures related to PEPs and beneficial ownership).

### Emergency financing (COVID-19) and governance safeguards
- For IMF emergency financing addressing the COVID-19 shocks, staff seeks enhanced governance measures while recognizing the urgent need for quick disbursements. Emergency financing is provided in upfront, outright disbursements, limiting scope for traditional conditions.
- Measures adopted to reduce misuse of funds:
  - Staff assesses public financial management, anti-corruption, and AML measures that can be requested without unduly delaying disbursements; specific commitments are tailored to country circumstances and normally include audits and transparency in procuring goods and services. Variations of these commitments have been included for the large majority of countries receiving emergency IMF assistance related to the COVID-19 crisis.
  - All countries receiving emergency financing must commit to undertaking a "Safeguards Assessment" (unless such an assessment has already recently occurred). Safeguards Assessments evaluate a central bank's governance, reporting, and controls and include time-bound recommendations where shortcomings exist.
  - Where severe governance vulnerabilities are identified, governance-related prior actions have been used, including on central bank safeguards, procurement transparency, and key PFM measures.
  - Many countries receiving emergency assistance already have or will seek multi-year IMF arrangements better suited to addressing longer-term governance and corruption issues; staff will continue to include governance and anti-corruption measures in these programs.

### Key commitments under IMF emergency financing (Box 1)
- Two governance measures commonly committed in authorities’ Letters of Intent for COVID-19 emergency financing:
  - Undertake and publish on the government’s website an audit of crisis-related spending, typically conducted by the country’s supreme audit institution; where that institution lacks capacity or independence, a third-party auditor outside government may be used.
  - Publish crisis-related procurement contracts on the government’s website, identifying companies awarded contracts and their beneficial owners, and recording ex-post validation of delivery of services and products.
- Country teams consult World Bank governance practice experts to tailor procurement-related commitments to country circumstances and legal frameworks.
- One or both commitments have been included in the vast majority of emergency financing for countries previously assessed to have significant corruption risks or governance vulnerabilities.
- Historical context: past crises have been associated with financial scandals (examples cited include the Ebola epidemic in DRC 2019, security crises in Mali 2010 and 2015, 2010 earthquake funds, Petrocaribe funds). During the 2014–2016 Ebola outbreak in West Africa, financial irregularities were found in 37 percent of US$8 million of government spending funded by the Ebola Trust Fund in Liberia.

### Capacity, support, and institutional backstopping
- Functional departments provide support to country teams on governance-related issues:
  - FAD: support on fiscal governance issues (e.g., revenue administration, public financial management).
  - LEG: field support on governance and corruption issues for more than 22 Article IV consultation missions since the Framework’s adoption; HQ support to AIVs and program missions; upgraded support on AML/CFT and anti-corruption and rule of law issues.
  - STA: efforts on IMF data dissemination standards to enhance data transparency and governance.
  - FIN: safeguard assessments covering central bank governance arrangements.
  - MCM: support on financial sector oversight issues.
  - RES: assistance applying a model-based toolkit for analysis of governance reform.
- Country teams use SIPs and annexes to provide in-depth governance analysis; Annex II (in source) contains illustrative examples of how governance discussions have been incorporated into surveillance.

*Source: Fund staff calculations and analysis in "Progress in Implementing the Framework for Enhanced Fund Engagement on Governance," using IMF staff reports and WGI Control of Corruption Indicator (periods and notes as stated in the source).*

### 20.      CD has been a key element of the Framework in supporting Fund members and has

### ppea2020033 - 20.      CD has been a key element of the Framework in supporting Fund members and has

### Capacity Development (CD): focus and prioritization
- CD has been a key element of the Framework, focused on both ex-ante (diagnostics) and ex-post (implementation) aspects.
- CD for country authorities is being stepped up to support recommendations provided in surveillance and programs.
- Prioritization of CD at the institutional level is discussed in the Committee on Capacity Building (CCB). Since FY19, the CCB has identified anti-corruption as a growth area.
- Prioritization of CD interventions is considered in the context of the Resource Allocation Plan and varies depending on:
  - country demand;
  - governance and corruption vulnerabilities identified in surveillance and lending programs.

### Areas and modalities of CD delivery
- Enhanced CD activities address governance weaknesses in areas including:
  - central bank governance and operations;
  - financial sector oversight;
  - fiscal governance;
  - AML/CFT.
- CD on fiscal governance supports fiscal transparency and public financial management (PFM). Example: following a governance diagnostic mission (June 2019), FAD has been delivering remote CD on PFM for Honduras to address trust funds‘ vulnerabilities to corruption.
- Central bank CD focuses on:
  - strengthening central bank independence, decision-making, internal organization, and internal controls for operations;
  - adoption and implementation of accounting standards and reporting.
- Recent central bank governance cases with meaningful outcomes include Djibouti and Kosovo, which identified central bank governance vulnerabilities.
- UFR-related assessments of central bank safeguards are led by FIN with assistance from LEG.
- Demand for technical assistance on strengthening governance of supervisory authorities of banks has significantly increased.
- The Fund has a comprehensive CD program to assist members in strengthening their AML/CFT frameworks.
- MCM provides CD through long-term experts, peripatetic short-term experts, Financial Sector Stability Reviews (FSSR), and about 20 CD missions per year on central bank governance issues.  
- Since 2014, CD has been provided to some 58 recipient countries in all area departments.  

### Governance diagnostic missions: scope, outcomes, and publication
- Staff has conducted governance diagnostic missions to identify governance weaknesses in depth and discuss potential reform measures.
- To date, teams from relevant functional departments have conducted ten joint diagnostic missions on governance and corruption, primarily in a program context.
- Diagnostic missions consist of a “deep dive” examining vulnerabilities to corruption with more granularity and setting out a prioritized strategy of engagement.
- In most cases, country authorities have published key results of the diagnostics, either in their own report or via disclosure of an IMF TA report.
- The ten countries covered by diagnostic missions are:
  - Central African Republic;
  - Democratic Republic of Congo;
  - Equatorial Guinea;
  - Honduras;
  - Guinea-Bissau;
  - Mozambique;
  - Republic of Congo;
  - Paraguay;
  - Peru;
  - Zimbabwe.
- Publication of a governance diagnostic report or the authorities’ governance strategy is encouraged as a visible symbol of ownership and to allow civil society and other stakeholders to monitor implementation. Reports have been published for Republic of Congo, Equatorial Guinea, Mozambique, and Central African Republic.
- Analysis of staff reports and program documents (e.g., Republic of Congo) suggests diagnostic reports provided a major contribution to program design and reforms; in some cases, recommended reforms were implemented even prior to the conclusion of program discussions, indicating strong ownership.

### Virtual CD during the COVID-19 crisis
- Demand for IMF governance-related diagnostics and CD slowed during the COVID-19 crisis; overall CD delivery slowed, but continued demand persisted from some members for governance diagnostics and TA to support lending conditionality implementation.
- Staff provided virtual CD examples:
  - LEG provided virtual CD to Equatorial Guinea to support drafting a comprehensive anti-corruption law in line with the UNCAC requirements; the adoption of the anti-corruption law is a structural benchmark under Equatorial Guinea’s EFF-supported program.
  - LEG provided virtual CD to Pakistan to assist in enhancing its AML/CFT framework and meeting its FATF action plan.
  - Virtual support in Sierra Leone on good practices for setting up a fund for earmarked COVID-19 revenue and spending.
  - In Georgia, virtual support on implementation of revised accounting and reporting instructions and oversight and management of fiscal risks from SOEs and PPPs.
  - For Honduras, following the June 2019 diagnostic, FAD has been delivering remote CD on PFM, including to address trust fund vulnerabilities to corruption.
- Preparatory work to enable virtual governance diagnostics is being undertaken in HQ.

### Analytical work and knowledge sharing
- Implementation of the Framework has been supported by diverse analytical work featured in Fund flagship publications (e.g., Fiscal Monitor), departmental papers on regional governance issues, and working papers by staff.
- Staff is developing comprehensive internal notes on substantive anti-corruption areas related to the Framework, including:
  - anti-corruption agencies;
  - UNCAC requirements;
  - rule of law;
  - financial asset disclosure by public officials.
- A Fund-wide knowledge exchange website that includes good practices and relevant case studies is being set up to assist country teams.

### Outreach, communications, and engagement with civil society
- A comprehensive outreach and communications program aims to build understanding of and buy-in for the Fund’s role on governance.
- Outreach activities have included speeches by management, flagship events, bilateral meetings with stakeholders, and regular updates of factsheets.
- High-level seminars at the Annual and Spring Meetings, bilateral meetings with country delegations, parliamentarians, and civil society (including youth, academics, journalists) have been organized.
- Fund blogposts have discussed challenges, impact, and specific aspects of corruption.
- Engagement with civil society organizations (CSOs) is being enhanced:
  - CSOs provide insight on governance and anticorruption frameworks and support Fund policy recommendations (example: anti-corruption reforms in Ukraine).
  - Fund staff met with CSOs for all governance diagnostics and often consult with them for surveillance and program missions.
  - IMF Resident Representatives routinely engage with CSOs in-country.
  - COM has organized periodic roundtables with diverse CSOs.
  - Some CSOs (e.g., Transparency International and Human Rights Watch) provide external assessments of Fund actions on governance issues.
  - CSOs note constraints imposed by some political regimes on their operations; such constraints are generally outside the Fund’s purview.
  - Overall CSO feedback: pleased the Fund stepped up coverage of governance and corruption in surveillance and lending, but more can be done to strengthen evenhandedness of coverage and collaboration with CSOs.
- Management and staff have maintained active dialogue with CSOs during the COVID-19 crisis to address governance challenges associated with emergency financing.

### Innovation and outreach initiatives
- An Anti-Corruption Challenge was launched with a one-day event at the iLab during the 2019 Annual Meetings, attracting over 120 proposals to tackle corruption from IFIs, country authorities, and CSOs.
- Eight teams were selected to move forward; with Swiss authorities’ support, seed funding has been provided to develop proposals to be presented during the 2020 Annual Meetings.

### Collaboration with other international institutions
- World Bank collaboration:
  - Periodic meetings between World Bank and Fund staff identify and discuss governance and corruption vulnerabilities by country.
  - Fund staff integrates Bank analysis and reports (e.g., CPIA, Doing Business, procurement and PPP reports, SOE expertise) into Fund assessments.
  - World Bank regional and technical staff attend brainstorming sessions in preparation for Article IV consultations or program missions, supporting prioritization.
  - World Bank staff contribute materials and background information for governance diagnostics and have participated in some missions, often covering public procurement.
  - The World Bank is a partner in the Anti-Corruption Challenge.
  - Collaboration raises the influence and traction of the governance agenda and focuses on improving quality, traction, and efficiency of both institutions’ engagement on governance vulnerabilities.
- Other institutional collaboration:
  - UNODC: acts as Secretariat to the Conference of the States Parties, supports the Implementation Review Mechanism (IRM), delivers TA, and provides country reports and expertise used in Article IV, program, and diagnostic reports.
  - OECD: the OECD Anti-Bribery Convention and the OECD Working Group on Bribery (WGB) provide monitoring and internal guidance (adopted April 2019) that detail rules of engagement for Fund coverage of the supply-side of corruption; WGB materials are the basis for coverage in Article IV reports.
  - FATF: FATF mutual evaluation reports identify legal and institutional weaknesses facilitating concealment of proceeds of corruption; the Fund bases assessments on the FATF AML/CFT standard and works closely with FATF on concealment issues in Article IVs.
  - Financial Stability Board and other standard setters: Fund staff coordinates with bodies that developed comprehensive tools related to financial sector oversight (e.g., Corporate Governance Principle for Banks and Core Principles for Effective Banking Supervision).

*Italic line: Source: ppea2020033 - 20.      CD has been a key element of the Framework in supporting Fund members and has*

### 30.      More broadly, the Framework has been welcomed by the international community and

### PROGRESS IN IMPLEMENTING THE FRAMEWORK FOR ENHANCED FUND ENGAGEMENT ON GOVERNANCE

### International engagement and partnerships
- The Framework has "revitalized the Fund’s participation in key global anti-corruption fora."
- Fund staff now regularly attend and contribute to:
  - the G20 Anti-Corruption Working Group,
  - the OECD-Development Assistance Committee’s Anti-Corruption Task Team meetings,
  - the World Economic Forum Partnering Against Corruption Initiative (PACI) events.
- Staff aims to expand contact with regional bodies, such as the Group of States Against Corruption (GRECO) of the Council of Europe, and with regional development banks.
- The Convention establishes an open-ended, peer-driven monitoring mechanism carried out by the OECD Working Group on Bribery; country monitoring reports contain recommendations formed from rigorous examinations of each country.

### Remaining challenges and next steps
- Continued efforts are needed to support the Framework’s implementation; the following challenges are expected to feature in the near future:
  - Ensuring sustained engagement by the Fund:
    - Progress on strengthening governance and anti-corruption efforts is expected to be gradual and require persistent effort.
    - The governance workstream will require continued dedication of resources from area and functional departments and sustained efforts over an extended period of time.
    - Continued commitment by the Board and management that governance and anti-corruption issues are a priority for the Fund is required.
  - Ownership and sustained efforts by country authorities:
    - Governance and corruption remain sensitive topics; political will can be difficult to foster.
    - Country teams report better engagement when they:
      - continue to explain the rationale for staff positions and recommend practical, granular, and operational solutions by (i) providing comparisons with peer countries and sharing their experiences; (ii) providing analysis on the benefits of lower corruption for macroeconomic performance; and (iii) following-up on implementation of past recommendations;
      - engage the authorities early in the process (e.g., during staff visits), including through their Executive Directors, and identify and work with champions for reform among senior government officials;
      - explain that the country is not being singled out; governance assessments are done for all 189 members, including on transnational aspects for several advanced economies;
      - are mindful about political economy and timing issues and, where possible, sequence discussions in stages to allow authorities to digest discussions and provide feedback, balancing legal and institutional reform with efforts to improve implementation;
      - conduct outreach and communications to relevant stakeholders; in some countries, CSOs raised concerns about the Fund’s role and limited impact of governance and anti-corruption engagement, and CSOs generally appreciated continuous engagement by staff to discuss governance-related concerns and leverage their role in engaging governments on those reforms;
      - build on authorities’ priority reform areas and highlight achievements and progress in staff reports, and underline any slowing or backtracking of reforms;
      - clearly indicate in staff reports where authorities did not engage effectively on governance-related issues and engage in early discussions of these issues for the next surveillance cycle.
  - Supporting country teams:
    - Country teams on missions may not always feel equipped to discuss technical issues such as anti-corruption frameworks, rule of law, financial sector oversight, and AML/CFT.
    - Functional departments will need to continue to support country teams through HQ-based brainstorming sessions, in-field mission support for surveillance and UFR, and governance diagnostic missions.
    - Maintaining strong expertise, institutional knowledge management, regular in-reach and training to staff, a knowledge exchange website, and periodic in-reach sessions to area departments is essential.
  - Filling data gaps:
    - Data coverage and staff knowledge of governance issues differs across countries.
    - Where prior technical assistance, safeguards assessments, FSAP or FSSR, AML/CFT assessments, or a governance diagnostic exist, staff will have more data and knowledge.
    - It is important to leverage work of other international organizations (e.g., the World Bank on procurement and SOEs) and seek information from local stakeholders and country-specific micro data where appropriate.
    - Several initiatives to fill data gaps include: (i) analytical work on data issues (APD published a working paper on the use of big data to assess the macro impact of corruption); (ii) ongoing work on corruption risks in upcoming policy papers on informality and illicit financial flows; and (iii) the Fund’s Anti-Corruption Challenge including the topic of measurement of corruption risks.
  - Securing additional volunteers for assessing transnational aspects:
    - Staff has encouraged members to volunteer for coverage of supply-side and concealment issues; so far only G7 countries, Austria, the Czech Republic, and Switzerland volunteered to undergo such assessments.
    - Further volunteers are needed to strengthen the Fund’s contribution on transnational facilitation of corruption.
  - Tracking authorities’ commitments under rapid instruments:
    - Monitoring implementation of commitments by authorities benefiting from RFI/RCFs during the Covid-19 crisis will require enhanced engagement from country teams.
    - Failure to implement commitments may lead to further governance and anti-corruption-related conditionalities under upcoming programs and/or relevant policy advice discussed through surveillance.

### Stocktaking and formal review
- A comprehensive, in-depth stocktaking of the experience with the 2018 Framework is planned in the context of the formal review of the Framework scheduled for mid-2021.
- The review will be consultative and cover implementation across the membership.
- The review will assess progress toward promoting more systematic, effective, candid, and evenhanded engagement with member countries on macro-critical governance vulnerabilities—the overall goal of the Framework.

### Key findings from the 2017 stocktaking of the 1997 Governance Policy
- The 2017 stocktaking found considerable progress in implementing the 1997 Governance Policy but identified important weaknesses and scope to strengthen Fund engagement on governance and corruption issues:
  - Insufficient transparency in Fund engagement:
    - IMF staff were often hesitant to use the word “corruption”; staff diagnosis and policy recommendations were frequently shrouded in euphemisms and sometimes superficial.
    - The stocktaking concluded staff should be more direct and explicit in discussing corruption-related issues.
  - Problems assessing the threshold issue of the scale of corruption and its macroeconomic impact:
    - Staff had difficulty determining a threshold for engagement as called for by the 1997 policy.
    - The review called for development of a consistent and systematic method for assessing the nature, sources, extent, transmission channels, time horizon, and impact of corruption in a country, including guidance on the use of TPIs.
  - Uneven coverage of corruption issues across the Fund’s membership:
    - The stocktaking raised questions about evenhandedness in treating similarly situated countries similarly.
    - Staff focused more on developing countries than advanced economies; more on those needing Fund lending than those not; and more on domestic corruption than transnational aspects.
    - Coverage was less under surveillance compared to lending; in surveillance, analysis and advice on corruption issues was often generic and episodic.
  - Lack of systematic collaboration with other institutions:
    - Fund staff could have collaborated better with other international institutions to leverage expertise and minimize duplication.

### Selected surveillance cases — governance and corruption issues (high-level remedies recommended)
- Bulgaria (2019 Article IV and SIP):
  - Address risk of corruption and organized crime; strengthen anti-corruption framework and fiscal governance.
  - Recommendations included enhancing verification of asset declarations, improving management of unified anti-corruption agency, improving governance in utilization of public resources, and strengthening SOE management frameworks.
- Djibouti (2019 Article IV and SIP):
  - Vulnerabilities: fiscal governance (public procurement, cash management, SOE oversight), weak contract enforcement, ineffective AML/CFT and anti-corruption frameworks, corporate governance under financial sector oversight.
  - Policy advice: strengthen public procurement, adopt treasury single account, expand SOE audit coverage, improve judiciary capacity, implement PEPs/beneficial ownership/asset declaration reforms, bolster domestic cooperation between FIU and anti-corruption agency.
- Malaysia (2019 Article IV; 2020 Article IV update):
  - Weaknesses: fiscal governance, AML/CFT, anti-corruption framework.
  - Recommendations: legislative reforms for public investment management and SOE oversight; extend asset declaration coverage; implement beneficial ownership requirements; ensure independence of anti-corruption commission; freedom of information; political financing reforms.
  - Noted progress: legislative initiatives on procurement reform, freedom of information, independence of anti-corruption institutions; launch of a National Anti-Corruption Plan (NACP) in January 2019.
- Mexico (2019 Article IV):
  - Covered corruption, money laundering, financial sector oversight, rule-of-law vulnerabilities.
  - Recommendations: centralize and digitalize public procurement; implement anti-corruption constitutional reforms (appoint judges/prosecutors, asset declaration, transparency measures); enhance transparency of beneficial ownership; strengthen rule of law and judicial capacity; improve financial sector supervision (related party definitions, operational independence and budget autonomy of supervisors).
- Nigeria (2019 Article IV):
  - Corruption has substantive impact on macroeconomic outcomes, especially in the petroleum sector; lack of clear accountability framework; political capture hampering reforms.
  - Recommendations: use technology in tax administration, automated interface between tax agency and Treasury Single Account, remove tax exemptions and customs duty waivers; reform legal and institutional framework for public sector accountability (extractive industry contract disclosure and remittances transparency); enhance beneficial ownership transparency; reinforce asset declaration regime for PEPs and SOE senior executives; strengthen AML/CFT supervision and governance reforms for tax administration, procurement, market regulation, central bank governance, FX policies, and financial sector oversight.

### Selected cases of transnational corruption in Article IV consultations
- United Kingdom — 2018 Article IV (concealment and supply-side):
  - Corporate transparency improving; development and implementation of verification measures for beneficial ownership in the People with Significant Control (PSC) register.
  - Anti-foreign bribery enforcement strengthened: legislative reforms such as deferred prosecution agreements and effective Serious Fraud Office (SFO) approach.
  - Recommendations: maintain SFO role in foreign bribery cases; improve interagency cooperation and independence of investigations; improve coordination between England, Wales, and Scotland and Scotland’s enforcement capacity; enhance AML reporting to detect foreign bribery; strengthen engagement with CDBOT on detection and enforcement; extend rapid exchange agreements to cover trusts; review HMRC capacity to detect and report foreign bribery.
- United States — 2019 Article IV (concealment issues):
  - The United States is "substantially effective" at investigating and prosecuting money laundering and cooperating with other jurisdictions over corruption proceeds.
  - The Department of Justice Kleptocracy Asset Recovery Initiative has restrained US$2.8 billion in assets and repatriated over US$150 million to countries affected by corruption since 2010.
  - In December 2017 the United States issued an Executive Order addressing corruption, resulting in 66 corruption-related designations as of May 16, 2019.
  - Identified gaps and recommendations:
    - Measures to prevent abuse of companies are inadequate; lack of readily accessible beneficial ownership information hinders investigations.
    - The United States only complies partially with preventive requirements for regulated firms regarding identification and verification of beneficial ownership for customers and PEPs.
    - Major improvements needed to make lawyers, accountants, and trust and company service providers subject to customer due diligence and suspicious transaction reporting obligations.
    - Action needed to address money laundering risks in high-end real estate where real estate agents are not subject to comprehensive AML/CFT requirements and nonbank mortgage lenders/originators have limited awareness of obligations, especially regarding PEPs.

*Source: ppea2020033 - 30.      More broadly, the Framework has been welcomed by the international community and*

### Annex IV. Examples of Fund-Supported Programs with

### Annex IV. Examples of Fund-Supported Programs with Governance and Anti-Corruption Conditionality

### Republic of Congo
- Program: three-year ECF-supported program (approved in July 2019).
- Emphasis: structural reforms to strengthen governance, transparency, and anti-corruption efforts.
- Pre-approval reforms:
  - mandatory publication of the audited financial statements of the state-owned oil company on an annual basis.
  - passed laws establishing a new anti-corruption commission, a new transparency commission, and asset declaration requirements for senior officials.
- Prior actions (four) on transparency and governance included:
  - submission to Parliament of three reports (on oil-backed borrowing, oil-financed infrastructure, and public investment spending).
  - publication of KPMG reports reconciling oil exports with state oil revenue.
- Structural benchmarks:
  - adoption of implementing decrees to operationalize the new anti-corruption commission and the transparency commission.
  - submission to Parliament of a new anti-corruption law designed to ensure full compliance with Congo’s obligations under the UNCAC.

### Honduras
- Program: two-year SBA/SCF-supported program.
- Approach: governance diagnostic mission at program outset to identify cross-cutting governance issues and prepare a reform roadmap.
- Structural benchmarks across three areas:
  - Fiscal governance:
    - creation of new PPP unit in the Treasury.
    - implementation of an enhanced procurement platform.
    - key legal reforms to the procurement law.
  - AML/CFT framework:
    - upgrading the identification of beneficial owners, including through the creation of a centralized register.
  - Anti-corruption apparatus:
    - improving public officials’ asset declaration system.
- Complementary reforms: public finance management, revenue administration, the public electricity company, and the reduction of red tape.
- Technical assistance: recent Fund TA supported drafting a new central bank charter and identified institutional reforms from Fund safeguards assessments of the central bank are underway.

### Pakistan
- Program: three-year EFF (approved in July 2019).
- Priorities highlighted:
  - strengthen effectiveness of anti-corruption institutions.
  - improve governance, transparency, and efficiency of state-owned enterprises (SOEs).
  - central bank governance improvements.
- Ongoing and planned measures:
  - capacities of law enforcement agencies to conduct financial investigations continue to be upgraded.
  - establish a publicly available asset declaration system for high-level public officials.
  - complete the second review cycle of the implementation of the UNCAC.
  - conduct a domestic assessment of the framework for anti-corruption institutions.
  - improve mechanisms for international cooperation to identify assets owned by Pakistani citizens located abroad and recover stolen assets.
- SOE reform (with IMF technical assistance):
  - a new SOE law is being prepared to define the rationale for state ownership, ensure SOE operations are grounded on commercial footing, and regulate oversight and ownership arrangements (end-September 2020 structural benchmark).
  - a triage of all SOEs expected to be finalized to identify those maintained under state management, subject to privatization, or liquidated (end-September 2020 structural benchmark).
  - interim actions: advance privatization and audits of selected SOEs.
- Central bank reform: SBP Act is being amended to strengthen the State Bank of Pakistan’s autonomy, governance, and mandate in line with IMF safeguards assessment recommendations.

### Moldova
- Program: EFF/ECF-supported program.
- Comprehensive reforms described in program reviews:
  - rehabilitated the banking system and strengthened financial sector governance.
- Specific progress:
  - secured bank shareholder transparency via fitness and probity of bank owners.
  - improved supervisory and regulatory frameworks.
  - unwound bank related-party exposures.
- Additional measures included:
  - safeguard central bank independence.
  - enforce the rule of law.
  - strengthen supervisory and regulatory frameworks, particularly for the non-bank financial sector and SOEs.
  - strengthen AML/CFT and anti-corruption frameworks.

### Sri Lanka
- Program: three-year EFF-supported program approved in June 2016 (prior to implementation of the enhanced governance framework); subsequent program reviews addressed governance weaknesses.
- Fiscal governance measures and implementation status:
  - structural benchmarks to support stringent SOE governance (e.g., Cabinet to approve a resolution strategy for Sri Lankan Airlines and record the fiscal cost of non-commercial obligations (including subsidies) for SOEs in the central government budget) were partially implemented.
  - work to enhance fiscal transparency by compiling fiscal statistics in accordance with the 2014 Government Finance Statistics Manual (GFSM) with support from IMF TA.
- Anti-corruption and legal measures:
  - MEFP for the fifth and sixth review outlined efforts to strengthen the anti-corruption framework and combat bribery.
  - Cabinet approved the National Action Plan for Combating Bribery and Corruption, envisaging:
    - prevention measures;
    - value-based education and community engagement;
    - institutional strengthening of Sri Lanka’s anti-corruption commission and other law enforcement agencies;
    - law and policy reforms to strengthen anti-corruption efforts and compliance with international obligations.
  - authorities amended the bribery act in July 2018 and established new courts to try bribery and corruption cases.
- AML/CFT measures: MEFP laid out steps to enhance implementation of AML/CFT measures to ensure removal from FATF’s grey list.
- Central bank governance: program included a commitment to adopt the new Central Bank Act to establish a sound legal and institutional infrastructure for flexible inflation targeting and strengthen the central bank’s governance, accountability, and transparency frameworks.

*International Monetary Fund — Annex IV examples of Fund-supported programs with governance and anti-corruption conditionality*

### Annex V. COVID-19 Related Emergency Financing—Letter of

### Annex V. COVID-19 Related Emergency Financing—Letter of Intent (LOI) Commitments for Governance Safeguards

### Transparency and regular reporting
- Many LOIs commit to publishing regular reports on pandemic-related spending (examples: Afghanistan commits to publishing quarterly reports; Bahamas commits to report quarterly on COVID-19 mitigation spending; Gabon commits to report quarterly on the spending of emergency funds).
- Specific publication platforms and frequencies cited:
  - Quarterly reports: Afghanistan; Bahamas; Comoros; Gabon; Guatemala; Mali; Mongolia; Nepal; Tunisia (general); Uzbekistan (monthly, but also reporting commitments).
  - Monthly reports: Democratic Republic of Congo commits to publish budget execution figures contained in the treasury plan on a monthly basis; Seychelles will submit monthly reports and make them public within three months; Nigeria commits to report funds released and expenditures incurred monthly on the transparency portal (http://opentreasury.gov.ng/).
- Commitments to publish budget lines, supplementary budgets, or to centralize crisis measures:
  - Djibouti: outline new measures in a supplementary budget expected to be submitted to Parliament in May.
  - Cameroon: COVID-19 related expenditures being incorporated in a supplementary budget expected to be presented to the Parliament in June 2020.
  - Niger: enshrine fiscal crisis measures in a supplementary budget and centralize costing at the Ministry of Finance.
  - Sao Tome and Principe: revised budget to be submitted to parliament at the latest by end-July.
  - Uganda: provide a separate reporting mechanism in the context of Program Based Budgeting; define thresholds for large procurement contracts as Ush500 million for works and Ush200 million for goods and services.

### Procurement transparency and beneficial ownership disclosure
- Many commitments require publishing COVID-19 related procurement contracts, often including:
  - Names of awarded companies and beneficial owners (Afghanistan; Bahamas; Bangladesh; Bolivia; Cameroon; Comoros; Democratic Republic of Congo for contracts exceeding USD 1 million; Djibouti for contracts in excess of US$100,000; Ecuador; Guinea (LOI not yet published); Kyrgyz Republic; Liberia; Malawi; Mali; Mauritania; Mongolia; Mozambique; Myanmar for contracts above Kyat 100 million; Nepal; Papua New Guinea; Rwanda; Sierra Leone; Solomon Islands; St. Vincent & the Grenadines; Tajikistan; Uzbekistan).
  - Full text of procurement contracts and ex-post validation of delivery (Bangladesh; Bolivia; Comoros; Gabon; Mongolia; Montenegro; Mozambique; Myanmar; Nepal; Rwanda; Solomon Islands; Uganda; Uzbekistan).
- Thresholds and timing specified in selected LOIs:
  - Democratic Republic of Congo: publish online all COVID-19 related procurement contracts that exceed US$12,000 and disclose beneficial ownership for contracts exceeding USD 1 million.
  - Djibouti: publish procurement contracts of COVID-19 expenditures in excess of US$100,000.
  - Liberia: publish procurement contracts above US$200,000 for goods, above US$400,000 for works, and above US$100,000 for services.
  - Myanmar: publish procurement contracts within 3 months of being signed above Kyat 100 million, including names and beneficial owners, price per unit, and overall contract amount.
  - Papua New Guinea: State of Emergency Controller posts procurement details within a week; relevant information through May 11 posted on May 18 (prior action).
  - Uganda: publish contracts above Ush500 million for works and above Ush200 million for goods and services, together with names of awarded companies and their beneficial owners.
- Commitments to modernize procurement frameworks and laws:
  - Bahamas: intend to finalize the Public Procurement Law by end-June and submit the Public Financial Management Bill and the Public Debt Management Bill to Parliament by end-2020.
  - Uzbekistan: continue to improve procurement framework expeditiously in line with international best practice, including by publishing information on beneficial owners.
  - Kyrgyz Republic: publish documentation on direct procurement and bidding documents on the Public Procurement portal, including of state-owned enterprises and joint stock companies with state shares of more than 50 percent.

### Audit commitments and ex-post reviews
- Wide-ranging commitments to undertake independent, ex-post, or external audits of COVID-19-related spending, with specified timelines in many cases:
  - Publish audit reports within specific timeframes: Afghanistan — publish audit reports by end-December; Bahamas — audited within 9 months of the end of the fiscal year; Bangladesh — audit by the Office of the Comptroller and Auditor General within 12 months; Mongolia — independent third-party audit within six months of disbursement; Montenegro — publish results online within 12 months of the end of the fiscal year; Liberia — post-crisis audit within a year and publish results online within two weeks of finalization; Solomon Islands — audit before December 2021; Uzbekistan — publish audit report no later than six months after the end of the fiscal year as part of the regular audit of the 2020 State Budget Report.
  - Specific auditors/entities named: Supreme Audit Office (Afghanistan); Auditor General / Auditor General’s Department (Bahamas; Jamaica; Pakistan); Office of the Comptroller General (Ecuador); Court of Accounts / Chamber of Accounts / Court of Accounts of various countries (Mauritania; Moldova; Tajikistan; Kyrgyz Republic; Montenegro; Uzbekistan); General Audit Commission (Liberia); National Audit Office (Malawi); Office of the Auditor General (Myanmar; Solomon Islands).
  - Timing examples: Comoros — commission an independent audit in about a year’s time; Gabon — independent third-party audit within six months of disbursement; Djibouti — independent ex-post audit in about a year’s time; Liberia — audit within a year of RCF approval and publish results within two weeks of finalization; Sierra Leone — Audit Service will publish its report online within 12 months of the end of the fiscal year; Papua New Guinea — commission and publish an audit within a year of the end of the emergency.
- Commitments to publish ex-post validation of delivery alongside audit results and procurement documentation (Bangladesh; Bolivia; Comoros; Ecuador; Guatemala; Liberia; Malawi; Mongolia; Nepal; Rwanda; Sierra Leone; Solomon Islands; Uzbekistan).

### Public financial management, budgeting, and safeguards
- Commitment to keep emergency spending on-budget, apply existing budgetary procedures and controls, and use Treasury Single Account (TSA) arrangements in several LOIs:
  - Cameroon: funds linked to COVID-19 subject to strict application of budgetary procedures and controls and being incorporated in a supplementary budget.
  - Gambia: create a temporary fund within the treasury single account and prepare a comprehensive supplementary budget and a full audit of emergency spending once the situation normalizes.
  - Jordan: link the fund to the TSA and create specific budget lines to facilitate tracking.
  - Uzbekistan: appropriate COVID-19 emergency measures through the Anti-Crisis Fund; publish monthly reports on the Ministry of Finance website (www.mf.uz).
  - Democratic Republic of Congo: commit to publication of treasury plan budget execution figures on a monthly basis to enhance financial transparency.
- Use of reporting mechanisms and earmarking:
  - Grenada: resources from development partners will be earmarked for specific COVID-19-related expenses and accurate and timely information will be provided to the public.
  - Papua New Guinea: COVID-19 expenditure reports presented weekly to the Budget Management Committee; consolidated report to be submitted and published within three months of the end of the emergency.

### Anti-corruption, AML/CFT, and governance reforms
- LOIs link emergency financing to broader governance, anti-corruption, and AML/CFT improvements:
  - El Salvador: commit to combat corruption and strengthen AML/CFT frameworks; president assigned CICIES to inspect COVID-19 emergency funds and nominated a Committee in Charge and Accountable for Administering the Fund.
  - Myanmar: continue to work with Asia Pacific Group on a time bound remedial Action Plan to remove Myanmar from its enhanced monitoring list (AML/CFT); committed to targeted audits and publication of procurement information.
  - Nigeria: strengthen the role of the Federal Audit Board, strengthen asset-declaration framework and implement risk-based AML/CFT supervision; publish procurement plans and procurement notices including names of awarded companies and beneficial owners, and an independent audit report three to six months after the end of the fiscal year.
  - Montenegro and others: operationalize risk-based AML frameworks and adopt new AML/CFT laws or guidelines (Montenegro).
- Institutional measures and task forces:
  - Tajikistan: created a high-level Inter-agency Task Force chaired by the Deputy Prime Minister to guide spending decisions.
  - Sierra Leone: Anti-Corruption Commission launched the COVID-19 Response Transparency Taskforce and established a COVID-19 account; intends Audit Service Sierra Leone to audit and publish results.
  - Papua New Guinea: State of Emergency Controller required to post procurement details within a week.

### Examples of country-specific thresholds, timelines, and modalities (selected)
- Democratic Republic of Congo: publish procurement contracts exceeding US$12,000; disclose beneficial ownership for contracts exceeding USD 1 million.
- Djibouti: publish procurement contracts of COVID-19 expenditures in excess of US$100,000.
- Liberia: publish procurement contracts above US$200,000 for goods, above US$400,000 for works, and above US$100,000 for services.
- Myanmar: publish contracts above Kyat 100 million within 3 months of being signed.
- Solomon Islands: publish audit results and procurement documentation before December 2021.
- Liberia: publish audit results online within two weeks of finalization after a post-crisis audit conducted within a year.
- Bahamas: audit COVID-19 mitigation spending in accordance with international best practice within 9 months of the end of the fiscal year.
- Bangladesh: publish an audit by the Office of the Comptroller and Auditor General within 12 months.

*Source: Annex V. COVID-19 Related Emergency Financing—Letter of Intent (LOI) Commitments for Governance Safeguards (ppea2020033).*

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_Source: https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020033.pdf_