SYRIA
Summary
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Sanctions

Syria is currently subject to EU, US and Arab League Sanctions.

FAFT AML Deficient

Yes

Higher Risk Areas

 

Compliance with FATF 40 + 9 Recommendations

Supporter of / Safe Haven for International Terrorism

Not on EU White list equivalent jurisdictions

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

World Governance Indicators (Average score)

Failed States Index (Political)(Average score)

Medium Risk Areas

US Dept of State Money Laundering assessment

Weakness in Government Legislation to combat Money Laundering

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

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

 

Latest FATF Statement - 23 June 2017

Since February 2010, when Syria made a high-level political commitment to work with the FATF and MENAFATF to address its strategic AML/CFT deficiencies, Syria has made progress to improve its AML/CFT regime. In June 2014, the FATF determined that Syria had substantially addressed its action plan at a technical level, including by criminalising terrorist financing and establishing procedures for freezing terrorist assets. While the FATF determined that Syria has completed its action plan agreed upon with the FATF, due to the security situation, the FATF has been unable to conduct an on-site visit to assess whether the process of implementing the required reforms and actions is underway. The FATF will continue to monitor the situation, and will conduct an on-site visit at the earliest possible date.

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Syria was undertaken by the Financial Action Task Force (FATF) in 2006. According to that Evaluation, Syria was deemed Compliant for 5 and Largely Compliant for 8 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 5 of the 6 Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

Syria 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: -

 

The money laundering and terrorist financing concerns involving the Syrian civil war are multi- faceted and complex. The State Department lost its principal source of reporting on money laundering in Syria when it closed Embassy Damascus in February 2012. Much of the information contained in this report is based on information collected or verified in the 2011 reporting cycle.

Syria is not an important regional or offshore financial center. Prior to widespread civil unrest beginning in 2011, only 20 percent of Syria’s population used formal banking services, although private sector banks’ market penetration was growing rapidly. However, following the imposition of robust sanctions on individuals, entities, and banks by several jurisdictions, banking services are used considerably less. While large commercial transactions rely on banks, the majority of business transactions are still conducted in cash. The most obvious indigenous money laundering threat involves some members of Syria’s political and business elite, whose corruption and extra-legal activities continue unabated.

A lack of control and authority by the Syrian regime over significant parts of the country, a lack of necessary legislation and poor enforcement of existing laws contribute to significant money laundering and terrorist financing vulnerabilities in Syria’s banking and non-bank financial sectors. Estimates of the volume of business Syrian money changers conduct in the black market range between $15 and $70 million per day. Syria’s borders are porous, most official border crossings are outside the control of the regime, and several are currently controlled by armed opposition groups, including the Kurdish People’s Protection Units (YPG), as well as the Islamic State of Iraq and the Levant (ISIL), a designated terrorist organization. Furthermore, regional hawala networks, intertwined with smuggling and trade-based money laundering, raise significant concerns, including involvement in the financing of terrorism.

The unprecedented volume of participants making payments for illegal services to human traffickers, human smugglers, and document traffickers, including both fraudulent and genuine Syrian passports, entail enormous sums of money. The proceeds of crime generated from human smuggling are often placed into financial institutions by criminal gangs in the EU and Turkey.

Syria has been on the State Department list of countries sponsoring terrorism since the list’s inception in 1979. In 2011, when the Syrian regime began a violent crackdown against protestors, the United States, European Union, Arab League, and individual nations imposed sanctions against individuals, entities, and corporations assisting the regime’s crackdown. The United States has undertaken sanctions on individuals enacted through Executive Orders 13572, 13573, 13582, 13606, and 13608. Several subsequent rounds of sanctions have continued and have targeted the Commercial Bank of Syria (CBS), the Real Estate Bank, Syrian-Lebanese Commercial Bank (SLCB), Central Bank of Syria, Syrian International Islamic Bank, and U.S. dealings with the Syrian petroleum industry.

In May 2004, the U.S. Department of Treasury found the CBS and its subsidiary, the SLCB, to be financial institutions of “primary money laundering concern,” pursuant to Section 311 of the USA PATRIOT Act. This finding resulted from information that CBS had been used by terrorists or persons associated with terrorist organizations as a conduit for the laundering of proceeds generated from the illicit sale of Iraqi oil, and because of continued concerns that CBS was vulnerable to exploitation by criminal and/or terrorist enterprises. In April 2006, Treasury promulgated a final rule, based on the 2004 finding and proposed rulemaking, prohibiting U.S. financial institutions from maintaining or opening correspondent or payable-through accounts with CBS or its SLCB subsidiary.

After suspending Syria’s membership on November 12, 2011, the Arab League approved sanctions on Syria on November 28, 2011. These sanctions include cutting off transactions with the Syrian central bank; halting funding by Arab governments for projects in Syria; a ban on senior Syrian officials traveling to other Arab countries; and a freeze on assets related to President Bashar al-Assad’s government. The declaration also calls on Arab central banks to monitor transfers to Syria, with the result often slowing down nongovernmental organization donations and personal remittances.

There are eight public free trade zones (FTZs) in Syria. Iran had announced plans to build FTZs in Syria; however, it later dropped this idea in favor of pursuing a free trade agreement. China’s free zone in Adra was officially inaugurated in July 2008; As many as 325 businesses have been established in Adra to date. In October 2014, Syria also submitted an application to establish a FTZ with Russia. In October 2015, following Russia’s entrance into the conflict, Russia’s Ministry of Industry and Trade welcomed the potential to create a FTZ with Syria if political and economic issues were eventually resolved. As of 2012, the annual volume of goods entering the FTZs was estimated to be in the billions of dollars and was growing, especially with increasing demand for automobiles and automotive parts, which enter the zones free of customs tariffs before being imported into Syria. While all industries and financial institutions in the FTZs must be registered with the General Organization for Free Zones, part of the Ministry of Economy and Trade, the Syrian General Directorate of Customs continues to lack strong procedures to check country of origin certification or the resources to adequately monitor goods that enter Syria through the zones. There also are continuing reports of Syrians using the FTZs to import arms and other goods into Syria in violation of U.S. sanctions under the Syrian Accountability Act and a number of UNSCRs.

 

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SANCTIONS

Syria is currently subject to EU, US and Arab League Sanctions, which include an arms embargo and a broad range of other financial sanctions

 

The Arab League (comprising 22 Arab member states), of which this country is a member, has approved imposing sanctions on Syria. These include: -

-      Cutting off transactions with the Syrian central bank

-      Halting funding by Arab governments for projects in Syria

-      A ban on senior Syrian officials travelling to other Arab countries

-      A freeze on assets related to President Bashar al-Assad's government

The declaration also calls on Arab central banks to monitor transfers to Syria, with the exception of remittances from Syrians abroad.

It should be noted that Lebanon and Iraq have refused to impose the sanctions.

 

The Arab League has also boycotted Israel in a systematic effort to isolate Israel economically in support of the Palestinians, however, the implementation of the boycott has varied over time among member states. There are three tiers to the boycott. The primary boycott prohibits the importation of Israeli-origin goods and services into boycotting countries. The secondary boycott prohibits individuals, as well as private and public sector firms and organizations, in member countries from engaging in business with any entity that does business in Israel. The Arab League maintains a blacklist of such firms. The tertiary boycott prohibits any entity in a member country from doing business with a company or individual that has business dealings with U.S. or other firms on the Arab League blacklist.

 

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BRIBERY & CORRUPTION

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

13

World Governance Indicator – Control of Corruption

2

 

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INVESTMENT CLIMATE

Despite modest economic growth and reform prior to the outbreak of unrest, Syria's economy continues to deteriorate amid the ongoing conflict that began in 2011. The economy further contracted in 2013 because of international sanctions, widespread infrastructure damage, reduced domestic consumption and production, and sharply rising inflation. The government has struggled to address the effects of economic decline, which include dwindling foreign exchange reserves, rising budget and trade deficits, and the decreasing value of the Syrian pound. The ongoing conflict and economic decline have created a humanitarian crisis, prompting widespread need for international aid. Prior to the unrest, Damascus began liberalizing economic policies, including cutting lending interest rates, opening private banks, consolidating multiple exchange rates, raising prices on some subsidized items, and establishing the Damascus Stock Exchange. The economy remains highly regulated by the government. Long-run economic constraints include foreign trade barriers, declining oil production, high unemployment, rising budget deficits, increasing pressure on water supplies caused by heavy use in agriculture, rapid population growth, industrial expansion, and water pollution.