FATF AML Deficiency List
US Dept of State Money Laundering assessment
Non - Compliance with FATF 40 + 9 Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Weakness in Government Legislation to combat Money Laundering
Algeria is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies
Latest FATF Statement - 19 February 2016
The FATF welcomes Algeria’s significant progress in improving its AML/CFT regime and notes that Algeria has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in October 2011. Algeria is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Algeria will work with MENAFATF as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Algeria was undertaken by the Financial Action Task Force (FATF) in 2011. According to that Evaluation, Algeria was deemed Compliant for 3 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)
Algeria is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.
The extent of money laundering through Algeria’s formal financial system is understood to be minimal due to stringent regulations and a banking sector dominated by state-owned banks. Algerian authorities monitor the banking system closely. The Algerian financial system is highly bureaucratic and provides for numerous checks on all money transfers. The continued prevalence of archaic, paper-based systems and banking officials not trained to function in the modern international financial system further deter money launderers, who are more likely to use sophisticated transactions. However, a large informal, cash-based economy, estimated at 40 percent of GDP, is vulnerable to abuse by criminals. The real estate market is particularly vulnerable to money laundering.
Notable criminal activity includes trafficking, particularly of bulk cash, drugs, cigarettes, arms, and stolen vehicles; theft; extortion; and embezzlement. Public corruption and terrorism remain serious concerns. Porous borders allow smuggling to flourish.
The country is generally making progress in its efforts to combat money laundering and financial crimes. Over the past several years, the government has updated its criminal laws on terrorist financing and issued new guidelines for the Bank of Algeria and the Ministry of Finance’s Financial Intelligence Processing Unit (CTRF), Algeria’s FIU.
There are no international sanctions currently in force against this country.
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.
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.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 36
World Governance Indicator – Control of Corruption 29
Corruption is a serious obstacle for companies operating or intending to invest in Algeria. A culture of patronage permeates several aspects of Algeria's economy, strengthening the practices of nepotism and the use of connections to "get things done." Bribery and facilitation payments are also common practice, despite being criminal offenses. Bribes and "grease money" are mainly employed to overcome bureaucratic hurdles. The legal framework criminalizes a large range of corruption offenses, but enforcement remains a challenge and government officials engage in corruption with impunity. For further information - GAN Integrity Business Anti-Corruption Portal
Algeria's economy remains dominated by the state, a legacy of the country's socialist postindependence development model. In recent years the Algerian Government has halted the privatization of state-owned industries and imposed restrictions on imports and foreign involvement in its economy.
Hydrocarbons have long been the backbone of the economy, accounting for roughly 60% of budget revenues, 30% of GDP, and over 95% of export earnings. Algeria has the 10th-largest reserves of natural gas in the world and is the sixth-largest gas exporter. It ranks 16th in oil reserves. Hydrocarbon exports have enabled Algeria to maintain macroeconomic stability and amass large foreign currency reserves and a large budget stabilization fund available for tapping. In addition, Algeria's external debt is extremely low at about 2% of GDP. However, Algeria has struggled to develop non-hydrocarbon industries because of heavy regulation and an emphasis on state-driven growth.
The government's efforts have done little to reduce high youth unemployment rates or to address housing shortages. A wave of economic protests in February and March 2011 prompted the Algerian Government to offer more than $23 billion in public grants and retroactive salary and benefit increases, moves which continue to weigh on public finances. Since late 2014, declining oil prices forced the government to spend down its reserves at a high rate in order to sustain social spending on salaries and subsidies, particularly since the government has been unable to boost exports of hydrocarbons or significantly grow its nonoil sector. In 2015, the Algerian Government imposed further restrictions on imports in an effort to reduce withdrawals from its foreign exchange reserves. The Government also increased the value-added tax on electricity and fuel, but said it would address subsidies at a later date.
Long-term economic challenges include diversifying the economy away from its reliance on hydrocarbon exports, bolstering the private sector, attracting foreign investment, and providing adequate jobs for younger Algerians.
Investment Climate - US State Department
Algeria remains a lucrative but challenging market for many U.S. businesses. Economic growth has been primarily driven by oil and natural gas, accounting for 94 percent of export revenues, 40percent of GDP and 60 percent of budget revenues. The drop in oil prices, while affecting Algeria’s main revenue stream, has spurred the Government of Algeria (GoA) to attempt to lower the country's sizable import bill through a policy of diversification that involves more local private-sector participation in the economic process.
The GoA has targeted non-hydrocarbon sectors for both public and private investments, with an emphasis on attracting greater foreign direct investment for projects that would directly boost employment and cut imports. Private sector contacts acknowledge that multiple sectors potentially offer substantial opportunities for long-term growth for U.S. firms with many having reported double-digit annual profits. Sectors targeted for robust investment include agriculture, tourism, information and communications technology, manufacturing, energy, construction infrastructure, and health. The GoA has singled out the auto manufacturing and renewable energy industries as sectors for growth and has offered lucrative, decades-long tax reductions, fixed-price contracts, and other incentives to companies willing to invest in localization of production.
However, challenges remain. Companies must overcome language barriers, distance, customs challenges, an entrenched bureaucracy, difficulties in monetary transfers and currency conversion, repatriating dividends, and price competition from Chinese, Turkish, and European businesses. International firms that operate here sometimes complain that the GoA lacks an economic vision, and that laws and regulations are constantly shifting and applied unevenly, raising the perception of commercial risk for foreign investors. Business contracts are likewise subject to changing interpretation and revision, which has proven challenging to U.S. and international firms. Other drawbacks include the 49/51 investment law (which requires majority Algerian ownership of all new foreign partnerships), inadequate IPR enforcement, and limited regional trade. The lack of any regionally integrated markets also impacts negatively Algeria, because on its own Algeria's market may not be attractive to firms that can locate elsewhere to create a regional distribution hub.
Despite the recognition and need for economic diversification away from hydrocarbons, the GoA has shown a reluctance to speed up economic reforms that would enhance Algeria's business climate. With regard to foreign trade, the GoA has taken the opposite approach, instituting protectionist policies to limit the outflow of capital from its declining foreign currency reserves, which further diminishes the attractiveness of the Algerian market. The International Chamber of Commerce Open Markets Index ranked Algeria in the bottom five percent of surveyed countries in 2015 in terms of trade openness. With the 2016 state budget law, the GoA established an import licensing and quota system, restricting imports of several products in which it seeks to protect and nurture domestic industries, including automobiles, construction, and agriculture. The introduction of the quotas and opaque system for granting licenses have brought imports in some sectors screeching to a halt and injected further volatility into prices and supply. According to business contacts, an unpredictable regulatory environment, inconsistent enforcement of laws and policies, and a bureaucratic customs process that impedes the efficiency and reliability of the supply chain also add significant uncertainty to the market.
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