HONDURAS
Summary
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Sanctions

None

FAFT AML Deficient

No

Higher Risk Areas

 

Not on EU White list equivalent jurisdictions

Corruption Index (Transparency International & W.G.I.)

World Governance Indicators (Average Score)

Failed States Index (Political Issues)(Average Score)

International Narcotics Control Majors List

Medium Risk Areas

US Dept of State Money Laundering Assessment

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

Honduras is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Latest FATF Statement - 16 February 2012

The FATF welcomes Honduras’ significant progress in improving its AML/CFT regime and notes that Honduras has largely met its commitments in its Action Plan regarding the strategic deficiencies that the FATF had identified in February 2010. Honduras is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Honduras will work with CFATF as it continues to address the full range of AML/CFT issues identified in its Mutual Evaluation Report, and further strengthen its AML/CFT regime.

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Honduras was undertaken by the Financial Action Task Force (FATF) in 2016. According to that Evaluation, Honduras was deemed Compliant for 13 and Largely Compliant for 17 of the FATF 40 Recommendations.

 

Risks and General Situation

The high levels of organized crime in Honduras, mainly related to drug trafficking activities, extortion and human trafficking by criminal groups, both national and transnational, especially drug cartels and street gangs or “maras”, are the main money laundering (ML) threats.

Moreover, the high levels of corruption among public institutions give this phenomenon a cross-cutting impact for ML and Terrorist Financing (TF) risk, being corruption a threat and a structural factor that contributes to the materiality of ML/TF offenses.

Designated Non-Financial Businesses and Profession (DNFBPs) are especially vulnerable for money laundering purposes given their recent incorporation as obliged subjects and the lack of effective supervision. Besides, an important vulnerability identified is with regard to the appropriate record keeping and updated data of legal persons and, therefore, legal persons can be used to carry out ML activities.

Evidently, the main risks arise from organized crime. Given this situation, the resources of the Honduran authorities are mainly destined to attack organized crime and the ML that results from it. Meanwhile the terrorism represents a lesser threat for the country. Regarding TF, the risk is perceived as low.

Nevertheless, since 2010, and especially since 2014, the authorities of the country have been issuing regulations and legislations aimed at addressing the detected situations. Additionally, new agencies have been created to fight organized crime, evasion and extortion, as well as inter-institutional agreements have been developed, which shows the commitment and the different strategies being implemented to mitigate the risks identified. Moreover, different bodies have been guided to strengthen international cooperation as a means to fight organized crime.

Key Findings

Honduras has made efforts to identify and understand the ML/TF risks to which it is exposed. The risks identified in the National Risk Assessment (NRA), are, to certain extent, related to the policies defined in previous documents, such as the Vision of the Country 2010-2038 and the Plan of the Nation 2010-2022. However, there are shortcomings that must be addressed in the short term and which are related to the disclosure of the NRA’s results and the communication with the private sector, especially regarding DNFBPs. Finally, the national strategy against ML/TF risks should be formalised.

Although there are some inter-institutional cooperation and collaboration agreements among the relevant Honduran agencies, there are still several informal channels that should be structured for adequate coordination. At the same time, some cooperation and coordination mechanisms should be extended to include combating the financing of proliferation of weapons of mass destruction (FPWMD).

The level of risk of terrorism and TF is understood as low by the authorities in Honduras. The current legal system enables Honduras to judge and punish those who commit or attempt to commit such acts.

There are shortcomings in the implementation and supervision of TF preventive measures by DNFBPs and non-profit organizations (NPOs), mainly those related to the compliance with the United Nations Security Council (UNSC) Resolutions that impose sanctions for terrorism and TF.

From a technical compliance and effectiveness point of view, the prevention of and combat against the FPWMD must be developed to reach the minimum compliance levels with the relevant Recommendations.

There is a marked difference between the implementation and knowledge of preventive measures among financial institutions and DNFBPs. Until the recent legislative modifications, DNFBPs had no clear AML/CFT obligations, therefore they did not show any implementation of preventive measures, which affected the effectiveness. Meanwhile, in general terms, it was evident that financial institutions understand their risks and obligations and that mitigation measures implemented are proportionate to their risks.

Honduras has an authorization granting regime for all segments of the financial sector, which includes “fit and proper” tests. Nevertheless, there are shortcomings in the non-financial sector. Effective, proportionate and dissuasive sanctions have been applied to obliged subjects of the financial sector. However, at the time of the on-site visit, DNFBPs had not been supervised and, nor sanctions had been applied to this sector.

Honduras has significant deficiencies regarding the identification of beneficial ownership of legal persons. Information regarding the creation and the operation of the different types of legal persons that can be incorporated in Honduras is not easily accessible. The information is not unified, complete or updated. Moreover, the incorporation of irregular companies is allowed, as well as the transfer of nominative and bearer shares, without greater controls regarding beneficial ownership.

With regard to international cooperation, Honduras has ratified several international instruments regarding the fight against ML/TF, for which different central authorities have been designated depending on the treaty. Despite not having a unique central authority, Honduras has proper statistics regarding the cooperation received and provided, especially with countries of the Central American region. Additionally, the regulation enables international cooperation regarding ML/TF offenses, among others. These laws include provisions that allow the freezing and confiscation of property of people being investigated for such offenses in Honduras. Nevertheless, there are no relevant provisions to share said property with foreign countries.

As regards extradition, the Honduran legal framework enables this type of collaboration for offenses such as drug trafficking, terrorism, organized crime, money laundering, and serving as figurehead. Moreover, several people have been extradited to the United States due to drug trafficking since 2014.

 

US Department of State Money Laundering assessment (INCSR)

Honduras was deemed a Jurisdiction of Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

 

Honduras is not an important regional or offshore financial center. Money laundering in Honduras continues to stem primarily from significant narcotics trafficking throughout the region. Human smuggling of illegal migrants into the United States, extortion, kidnapping, and public corruption also generate significant amounts of laundered proceeds.

Honduras’ geographic location makes it an ideal haven for transnational organized crime groups, including human and drug trafficking organizations. The Central America Four Agreement among El Salvador, Guatemala, Honduras, and Nicaragua allows for free movement of citizens of these countries across their respective borders without visas; however, citizens can be subject to immigration or customs inspections. The agreement represents a vulnerability of each country for the cross-border movement of contraband and proceeds of crime.

Money laundering in Honduras derives both from domestic and foreign criminal activity. The majority of proceeds are suspected to be controlled by local drug trafficking organizations and organized crime syndicates. A significant amount of laundered proceeds pass directly through the formal banking system. Money laundering also occurs to an increasing extent in the non- financial sector. Law enforcement has detected large-scale money laundering activities in the automobile and real estate sectors. Money laundering activities have also been identified in remittance companies, currency exchange houses, the construction sector, and many other kinds of businesses. Additionally, trade-based money laundering is a growing problem. The country’s lack of resources and capacity to effectively and efficiently investigate and analyze complex financial transactions, when combined with wide-scale corruption within the law enforcement and judicial sectors, contribute to a favorable climate for significant money laundering. There is smuggling of bulk cash, liquor, firearms, gasoline, clothes, illegally caught lobster, and cigarettes.

 

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SANCTIONS

There are no international sanctions currently in force against this country.

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

30

World Governance Indicator – Control of Corruption

35

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

The United States is Honduras’ most important economic partner, and the government of Honduras continues to strive to improve the investment climate, yet U.S. companies choosing to invest in Honduras continue to face significant challenges. Over 200 U.S. companies operate in Honduras. Many of them have taken advantage of the opportunities and protections available as a result of Honduras’ participation in the Dominican Republic - Central America - United States Free Trade Agreement (CAFTA-DR). The stock of U.S. foreign direct investment in Honduras exceeds $900 million. Honduras and has made notable improvements in market openness as measured by trade freedom, investment freedom, and financial freedom. However, the management of public spending, rule of law concerns, and a high incidence of corruption continue to pose challenges for prospective investors. Honduras’ position on major international rankings has declined as a result. The 2014 Heritage Economic Freedom Index gave Honduras a score of 57.1, down 1.3 points from 2013. The World Bank Doing Business 2014 ranked Honduras 127 out of 189 countries, falling two spots from the 2013 report.