Micronesia Country Summary

FATF Status

Micronesia is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations

Micronesia has not yet undertaken a Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards.

The Federated States of Micronesia (FSM) faces significant challenges related to corruption and criminal activities, including human trafficking and illegal fishing. While there are laws against corruption and some prosecutions have occurred, the effectiveness of enforcement is hampered by limited resources and a lack of dedicated anti-corruption agencies. Additionally, FSM serves as a transit point for human trafficking and drug trade, with foreign criminal gangs playing a prominent role in these activities.

The Federated States of Micronesia (FSM) is a lower middle-income nation with a GDP of USD336.4 million in 2017, primarily driven by commercial fishing and government employment, with 70% of adults working in the public sector. The economy has shown no growth over the past decade, heavily relying on over USD100 million in annual funding from the U.S. under a Compact of Free Association, which is set to change in 2023 to a trust fund model.

The investment climate in the Federated States of Micronesia (FSM) is hindered by significant structural impediments, including prohibitions on foreign ownership of land and businesses, a complicated registration process requiring approvals from multiple government levels, and weak enforcement of contracts. Foreign direct investment (FDI) is nearly nonexistent due to these challenges, alongside a lack of government incentives and a low tax-to-GDP ratio. Although recent amendments in Pohnpei State aimed to ease some restrictions on foreign investment, the overall environment remains unfavorable for potential investors.