LAOS
Summary

Sanctions

None

FAFT AML Deficient

Yes

Higher Risk Areas

 

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

Medium Risk Areas

US Dept of State Money Laundering Assessment

 

 

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 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: -

 

Laos’ fast-growing economy, weak governance, and geographic position at the heart of mainland Southeast Asia combine to make it vulnerable to money laundering and terrorism finance. The financial sector in Laos has expanded rapidly over the last decade and in spite of new legislation and regulations on money laundering, the sector remains under-regulated compared to other nations in the region, presenting an attractive target for money launderers. The gaming industry has little effective oversight and presents another money laundering opportunity. Cash-based transactions remain commonplace, even for large purchases, and government efforts to increase digitization of records and processes continue to move slowly.

Corruption is widespread. 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 underground economy and uses informal value transfer systems.

 

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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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