## Governance Diagnostics, Mali ## Source details **Canonical URL:** [Governance Diagnostics, Mali](https://www.imf.org/-/media/files/publications/selected-issues-papers/2023/english/sipea2023057.pdf) ## Other formats - [Markdown version](/-/media/files/publications/selected-issues-papers/2023/english/sipea2023057.pdf.md) - [Structured JSON version](/-/media/files/publications/selected-issues-papers/2023/english/sipea2023057.pdf.json) --- ### Background - Governance diagnostic mission conducted in early 2021 by experts from the IMF’s Fiscal Affairs and Legal Departments; paper completed on May 9, 2023 and based on information available as of March 31, 2023. - Focused on three pillars: rule of law, tax and customs administration, and public financial management. - Linked to the country’s Strategic Framework for Economic Recovery and Sustainable Development (CREDD). - Authorities developed an action plan based on the diagnostic to guide reforms and cooperation with the international community. - Transitional government appointed in October 2020 placed strong emphasis on good governance; previous commitments under the 2019-2022 ECF program. ### Rule of Law and Impartial Justice Findings - Strengthening judicial and legal transparency and exemplarity in managing the State is key to governance improvement. - Asset declaration framework weaknesses: - OCLEI (Office Central de Lutte contre l’Enrichissement Illicite) reported declining compliance with asset declaration requirements. - Despite non-compliance penalties under the law, no sanctions have been used since OCLEI was founded in 2017. - OCLEI lacks power to order seizure or freeze of assets suspected to result from illicit enrichment. - As of March 2023, limited progress: OCLEI’s capacity and ability to apply sanctions have not improved; government working on a comprehensive anti-corruption strategy without a timeline; OCLEI not directly involved in strategy development. - Mining sector governance risks: - Mali is one of the largest gold producers in Africa and a member of the Extractive Industries Transparency Initiative (EITI) since 2007. - Mining contracts are not published; limited public information on mining operations. - BVG (Bureau du Vérificateur Général) audits raised oversight concerns; investigations and publication of results are lacking. - Public procurement and beneficial ownership transparency gaps persist; Direction Générale des Marchés Publics now publishes information on public procurements above a certain threshold. - AML/CFT risks: - Mali remains on the FATF gray list as of March 2023. - Lack of transparency in extractive sectors increases AML/CFT risks. - Weak reporting and quality of suspicious transaction reports; uncertainty about responsible investigative body; weak coordination among law enforcement; limited capacity to trace and confiscate assets. - Of the 27 measures covered by the FATF Action Plan: four were addressed, 19 partially addressed and four were not addressed. - The four not addressed include sector-level risk assessments (most importantly the mining sector), introduction of effective sanctions for AML/CFT violations, addressing regulatory gaps in AML/CFT, and dissemination of UN sanctions lists. - Supervision of non-financial entities remains a weakness. - National Risk Assessment (NRA) developed jointly with the World Bank; an awareness and training program was designed to disseminate NRA results. - Upcoming FATF reviews in May 2023 and September 2023 are important for removal from the gray list. Recommendations / Immediate Actions - Reinforce OCLEI capacities through specialized training and grant powers relevant to carry out responsibilities, including asset seizure/freeze authorities. - Senior government members should submit asset declarations as an example; OCLEI should regularly publish compliance percentages among senior state officials. - Publish mining contracts and licences; investigate and publish results of BVG-detected irregularities in mining. - Increase transparency in public procurement and collect/publish beneficial ownership information for companies awarded public contracts. - Conduct sector-level AML/CFT risk assessments (prioritize mining); introduce effective sanctions for AML/CFT violations; address AML/CFT regulatory gaps; ensure dissemination and implementation of UN sanctions lists. - Strengthen reporting, supervision, and coordination mechanisms for suspicious transaction reporting and asset tracing/confiscation. ### Tax and Customs Administration Findings - Multiple tax exemptions outside the general fiscal regime and manual management impede traceability and create corruption opportunities. - Exemptions are managed outside parliamentary control, enabling direct negotiations between large sector groups and the government. - Complex and discriminatory tax calculation rules, lack of effective appeal mechanisms, and lack of inclusiveness in drafting tax and customs legislation. - Limited use of existing IT tools prevents implementation of an automated risk management system for selective tax and customs audits. - Integrity and accountability frameworks within tax and customs administrations are weak: - Internal control structures ineffective. - Obsolete procedures and relatively poor computer skills hinder early detection of deviant conduct. - Need to build internal auditors’ capacities and increase internal control offices’ resources. Recommendations - Streamline tax and customs administrations to improve governance, raise revenues, and improve the business environment. - Reduce discretionary, non-transparent tax exemption processes and bring them within parliamentary oversight. - Implement automated risk management systems and interconnect IT systems for fairer treatment of importers and taxpayers. - Develop a National Integrity Framework for tax and customs administrations to prevent corruption and integrity violations. - Strengthen internal audit capacity and resource internal control offices to detect corruption. ### Public Financial Management Findings - State-owned enterprises and corporations account for close to 87 percent of all losses observed in public finances (based on recent BVG reports). - Government has not achieved financial sustainability and effective operation of large SOEs. - An SOE monitoring unit has been set up within the Ministry of Finance and performance contracts have been signed with major SOEs. - Digitalization gaps: - Lack of interconnection between tax and customs management systems and the Treasury information system prevents effective and accurate accounting between revenue collection agencies and the Treasury. - Paper-based procedures remain widespread; Customs Code still treats paper-based declarations as the norm with electronic declaration as an option. - Paper-based expenditure procedures are complex and increase risks of loss and falsification of documents. Recommendations - Prioritize supervision and financial oversight of SOEs; publish SOE annual financial statements and audit reports where applicable. - Continue and deepen work on SOE monitoring and performance contracts. - Accelerate digitalization of tax, customs, and public financial management procedures: - Complete interconnection between various systems. - Computerize procurement procedures. - Modernize tax and customs administration websites to improve user information, public awareness, transparency, and business climate. *Prepared by Peter Kovacs; IMF Selected Issues Paper SIP/2023/057* --- _Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2023/english/sipea2023057.pdf_