LAOS
Summary

Sanctions

None

FAFT AML Deficient

Yes

Higher Risk Areas

 

US Dept of State Money Laundering assessment

Non - Compliance with FATF 40 + 9 Recommendations

Weakness in Government Legislation to combat Money Laundering

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

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

Laos is on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

FATF Statement re AML Strategic Deficiencies:  24 February 2017

Since June 2013, when Lao PDR made a high-level political commitment to work with the FATF and APG to address its strategic AML/CFT deficiencies, Lao PDR has substantially addressed its action plan at a technical level, including by: (1) establishing mechanisms for domestic AML cooperation; (2) adequately criminalising money laundering and terrorism financing; (3) establishing a legal framework for the confiscation, freezing, and seizing of the proceeds of crime; (4) establishing a targeted financial sanctions framework; (5) improving the legal status and resources of the FIU; (6) strengthening its STR legal framework and financial sector supervision; (7) and developing a cross-border declaration system. The FATF will conduct an on-site visit to confirm that the process of implementing the required reforms and actions is underway to address deficiencies previously identified by the FATF.

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Laos was undertaken by the Financial Action Task Force (FATF) in 2011. According to that Evaluation, Laos was deemed Compliant for 1 and Largely Compliant for 2 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for all 6 of the Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

Laos is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes

OVERVIEW

 

The fast-growing economy, weak governance, and Laos’ geographic position at the heart of mainland Southeast Asia combine to make it vulnerable to money laundering. Cash-based transactions, even for large purchases such as vehicles and real estate, remain commonplace, and government efforts to move toward electronic records and transactions continue to proceed slowly. The financial sector in Laos has expanded rapidly over the last decade, and while the government has enacted several new regulations aimed at preventing money laundering, officials’ knowledge remains relatively limited and implementation is untested, leaving Laos an attractive target for money launderers.

 

Corruption is widespread, though the government of Prime Minister Thongloun has focused greater government attention on the issue. Drug trafficking, wildlife trafficking, and human trafficking are major concerns. Traffickers are likely taking advantage of poor recordkeeping, weak enforcement of new regulations, and prevalence of cash transactions to launder the proceeds of their crimes. Smuggling is made easier by porous borders. Bulk cash smuggling to and from Thailand, China, and Vietnam is likely occurring. Laos has a large informal economy and uses informal value transfer systems.

 

Laos still needs to show improvement in several areas, including demonstrating fit and proper controls of banks and amending the penal code to include legal persons.

 

VULNERABILITIES AND EXPECTED TYPOLOGIES

Major sources of illicit funds in the jurisdiction are thought to include narcotics trafficking, wildlife trafficking, and proceeds of corruption. Money can easily be laundered in Laos’ cash- based economy, remote casinos remain a vulnerability, and large real estate developments are thought to be another vehicle for large-scale laundering. Authorities are poorly equipped to investigate. Central government control and ability to investigate outside of the capital can be inconsistent.

 

KEY AML LAWS AND REGULATIONS

 

Law No. 49/NA on Anti-Money Laundering and Combatting the Financing of Terrorism (AML Law), took effect on February 24, 2015. Under the law, covered entities are required to verify the identity of customers as well as the intention and objectives behind the transactions.

 

Laos has comprehensive KYC and STR regulations. Reporting units must report large transactions that exceed certain monetary thresholds and those under suspicion of being connected to money laundering.

 

The new “Regulation on the Establishment of Commercial Banks and Commercial Banks’ Branches” was issued in January 2016. This regulation includes controls over bank license holders and checks on sources of capital.

 

Laos is a member of the APG, a FATF-style regional body.

 

There is no current records exchange mechanism in place with the United States; Laos’ AML systems are nascent, though the government is exploring international cooperation mechanisms.

 

AML DEFICIENCIES

 

Laos’ major deficiencies include legal persons not being covered under existing legislation, though this should change with the new penal code, expected in mid-2017; lack of oversight for MVTS providers; and weak implementation capacity. Additionally, there is no protection against liability for individuals reporting suspicious activity, although safe harbor regulations have been discussed over the last year.

 

Laos’ system to identify, freeze, and seize assets is new and untested. Laos is not an Egmont member but is exploring membership.

 

Laos continued its AML reform efforts during 2016.

 

ENFORCEMENT/IMPLEMENTATION ISSUES AND COMMENTS

 

Enforcement capacity is weak, and political will can be inconsistent. However, Laos has increasingly engaged the international community on AML issues and has requested assistance where it is needed. Laos is working to implement the entirety of its action plan.

 

There were no AML-related prosecutions reported during the period.

 

The Bank of Lao People’s Democratic Republic and its Anti-Money Laundering Investigations Office are actively seeking assistance from donors and have worked closely with international experts during 2016 to build capacity and address deficiencies.

 

Laos is not subject to any U.S. or international sanctions or penalties.

 

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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

20

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

After a decade-long experiment with a pure Marxist economy following the founding of the Lao People’s Democratic Republic, the Lao PDR launched the “New Economic Mechanism” in 1986. Since that time, the country has gradually implemented the reforms and built the institutions necessary to a market economy. Over the last thirty years, the trend has been slow but steady progress, culminating in accession to the World Trade Organization in February, 2013. Since 2009, annual GPD growth has averaged approximately eight percent.

In order to meet the requirements for entry to the WTO, Laos engaged in major reforms of its economic and trade laws and regulations. The Lao government is now working to implement the commitments embodied in those laws, and to meet the 2015 goal for creation of the ASEAN Economic Community (AEC), which will further liberalize the trading environment and economy. Additionally, WTO and AEC requirements reinforce fuller implementation of the conditions of the 2005 U.S.-Laos Bilateral Trade Agreement.

Economic progress and trade expansion in Laos remain hampered by a low level of human resource development, weak education and health care systems, and a poor, although improving, transportation infrastructure. Institutions, especially in the justice sector, are a work in progress, and regulatory capacity is low. Additionally, increasing corruption has recently become a major concern, and the country has suffered through fiscal and monetary crises in the past year. The Lao economy is highly dependent on exploitation of natural resources, particularly in copper mining and hydropower. Although the services and industrial sectors have grown in recent years, the economy is in need of further diversification, and the majority of the Lao population is still employed in agriculture.

According to the 7th National Socio-Economic Development Plan (NSEDP) 2011-2015, Laos seeks to continue an annual economic growth rate in the neighbourhood of 8%. To accomplish this, the government of Laos estimates that it needs approximately US$15 billion of total investment in the next five years, US$7 to US$8 billion of which it plans to source from foreign and domestic private investment. The plan directs the government to formulate “policies that would attract investments in addition to attracting Overseas Development Assistance; begin to implement public investment and investment promotion laws; and increase cooperation with friendly countries and international organizations.”

 

 

 

 

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