How the IMF can have real impact on fighting corruption

The International Monetary Fund (IMF) is meeting in Washington DC this week. We want to send a strong message about what the multi-lateral lender can do to have greater impact on fighting corruption.

Yesterday, Wednesday October 11, we handed Christine Lagarde a summary of this article. She publicly thanked us then. Now it is time to deliver.

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The IMF is making all the right noises. Since making anti-corruption commitments at a summit in London in 2016, it has ramped up its tweets, blogs, videos, and speeches about corruption.

Now it is time to act.

Next year, the IMF will issue a new set of governance guidance to the countries it lends money to, for the first time since 1997. Transparency International wants these to include two strong anti-corruption measures that can be measured and monitored. A third related area of concern is the need for much stronger transparency and accountability measures around Public Private Partnerships (PPPs) for large-scale infrastructure investments.

Establish strong anti-corruption guidelines for country assessment teams

When any IMF team visits a country, whether to decide terms for its funding or as part of its regular reviews, these teams must start thoroughly evaluating the government’s anti-corruption measures.

Up until now the IMF has not been consistent across countries in its approach to assessing corruption, according to its own review published earlier this year. IMF reports have also used euphemisms such as “need for a level playing field”, instead of describing the specific corruption issue and the actions needed to address it.

IMF country assessment teams have also struggled to interpret the scope of their task, because the IMF understands its anti-corruption engagement to be limited to situations “where it is assessed to have a significant macroeconomic impact.”

This has to change.

We advocate for a standardised, core set of initial open-ended review questions that would increase equal treatment across countries, and help the IMF identify where a country needs further anti-corruption policy support.

Increase the focus on cross-border drivers of corruption in IMF country reviews

In its country reports, the IMF must begin regularly including an assessment of the anti-money laundering measures the government has taken.

At the London Summit, the IMF recognised the relationship between anti-money laundering and anti-corruption. But it continues to treat them primarily as domestic issues and has rarely addressed cross-border drivers of corruption in its country surveillance (known as “Article IV” reports).

Most Grand Corruption schemes would not be feasible without a way to launder the proceeds. More than two-thirds of the large-scale corruption cases analysed by the World Bank included the use of an anonymous shell company, often located in an offshore jurisdiction.

Corruption cases also frequently involve professional cross-border facilitators – lawyers, accountants and wealth managers. Similar actors and methods are used to launder the proceeds of crime and tax evasion, as recently recognised in a speech by the IMF Managing Director.

An increased focus on anti-money laundering effectiveness would not require an in-depth assessment to be carried out every year. For example, the IMF could get input from civil society to help prioritise the recommendations arising from other relevant reports, and then use annual reviews to keep track of how these priority recommendations are being implemented.

Ensure that Public Private Partnerships (PPPs) are fully transparent and undergo scrutiny for corruptions risks

Public Private Partnerships are long-term arrangements for the private sector to provide infrastructure and services, from hospitals and schools to bridges and highways. International institutions are increasingly promoting PPPs for social and economic infrastructure financing. However, there are also growing concerns about the lack of transparency, proper anti-corruption risk assessments, and conflict of interest checks for these large-scale ventures

We support calls on the IMF to ensure that the financing structures used for public services in infrastructure are responsible, transparent, environmentally and fiscally sustainable, and in line with governments’ human rights obligations.

Multi-lateral agencies should prioritise domestic resources to provide efficient and accountable public services and ensure that high transparency standards apply, particularly with regard to the accounting of public funds, and the disclosure of contracts and performance reports for social and economic infrastructure projects.

Transparency International believes that if these three areas are prioritised, the IMF can have a significant impact in reducing corruption.

If the IMF decides to apply more of its still considerable clout to regularly monitoring how well countries are doing in taking on corruption, and promoting best practice transparency and accountability standards, it will significantly boost its chances of being able to claim a substantive contribution to global anti-corruption progress by the time of its next governance review.

Image credit: IMF / Flickr