Armenia is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Armenia was undertaken by the Financial Action Task Force (FATF) in 2016. According to that Evaluation, Armenia was deemed Compliant for 18 and Largely Compliant for 17 of the FATF 40 Recommendations.
US Department of State Money Laundering assessment (INCSR)
Armenia was deemed a Jurisdiction of Primary Concern by the US Department of State 2018 International Narcotics Control Strategy Report (INCSR). The Overview from the report is as follows: -
Armenia is gradually strengthening its AML legislation to match international standards and has achieved eight money laundering convictions since the April-May 2018 “Velvet Revolution.” This number represents a marked increase over pre-revolutionary convictions.
Proposed changes to Armenia’s strict bank secrecy laws and draft legislation to establish a civil asset forfeiture regime should provide the Armenian criminal justice system with new authorities and tools to strengthen money laundering investigations and ramp up convictions further in 2020 and beyond.
In February 1992, the Organisation for Security and Co-operation in Europe (OSCE) requested that all OSCE participating states should introduce an embargo on 'all deliveries of weapons and munitions to forces engaged in combat in the Nagorno-Karabakh area'. This embargo is still in force.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 42
World Governance Indicator – Control of Corruption 43
Businesses operating or planning to invest in Armenia face high corruption risks. Progress has been made to fight pervasive corruption; however, the close relationship between oligarchs, and political and business circles raise concerns about cronyism and influence. The Criminal Code criminalizes several forms of corruption including active and passive bribery, extortion, and abuse of office. Gifts and Facilitation payments are also considered illegal in Armenia, nonetheless, these practices are widespread. For further information - GAN Integrity Business Anti-Corruption Portal
Under the old Soviet central planning system, Armenia developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to sister republics, in exchange for raw materials and energy. Armenia has since switched to small-scale agriculture and away from the large agroindustrial complexes of the Soviet era. Armenia has only two open trade borders - Iran and Georgia - because its borders with Azerbaijan and Turkey have been closed since 1991 and 1993, respectively, as a result of Armenia's ongoing conflict with Azerbaijan over the separatist Nagorno-Karabakh region.
Armenia joined the WTO in January 2003. The government has made some improvements in tax and customs administration in recent years, but anti-corruption measures have been ineffective. Armenia will need to pursue additional economic reforms and strengthen the rule of law in order to regain economic growth and improve economic competitiveness and employment opportunities, especially given its economic isolation from two of its nearest neighbors, Turkey and Azerbaijan.
Armenia's geographic isolation, a narrow export base, and pervasive monopolies in important business sectors have made it particularly vulnerable to the sharp deterioration in the global economy and the economic downturn in Russia. Armenia is particularly dependent on Russian commercial and governmental support and most key Armenian infrastructure is Russian-owned and/or managed, especially in the energy sector, including electricity and natural gas. Remittances from expatriates working in Russia are equivalent to about 20% of GDP and partly offset the country's severe trade imbalance. Armenia joined Russia in the Eurasian Economic Union upon the bloc's launch in January 2015, even though the ruble's sharp depreciation in December 2014 led to currency instability, inflation, and a significant decrease in exports from Armenia to Russia.
Armenia is located in the Caucasus region between Asia and Europe. The Government of Armenia (GOA) officially welcomes foreign investment. Armenia has a highly educated workforce and its high-tech and information technology (IT) sectors have attracted foreign investment – particularly from the United States. 2015 saw a major U.S. investment in Armenia’s energy generation sector with ContourGlobal’s acquisition of the Vorotan Hydroelectric Cascade. However, Armenia’s investment climate poses several serious challenges through its small market (Armenia has a population of less than three million); relative geographic isolation due to closed borders with Turkey and Azerbaijan; per capita gross national income (GNI) of about USD 4,000; and high levels of corruption. In January 2015, Armenia formally entered the Eurasian Economic Union trading bloc, creating a single economic market of 176 million people between Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. Furthermore, it is still implementing many EEU-related changes to its trade and customs regimes. In May 2015, Armenia signed a Trade and Investment Framework Agreement (TIFA) with the United States. The TIFA establishes a United States-Armenia Council on Trade and Investment to discuss bilateral trade and investment and related issues and examine ways to strengthen the trade and investment relationship between the two countries.
Armenia does not limit the conversion and transfer of money or the repatriation of capital and earnings, including branch profits, dividends, interest, royalties, and management or technical service fees. The banking system in Armenia is sound and well-regulated, but Armenia's financial sector is not highly developed. Foreign individuals who do not hold special residence permits cannot own land, but may lease it; companies registered by foreigners in Armenia as Armenian businesses have the right to buy and own land. There are no restrictions on the rights of foreign nationals to acquire, establish or dispose of business interests in Armenia. The U.S.-Armenia Bilateral Investment Treaty (BIT) provides that if a dispute arises between an American investor and the Republic of Armenia, the investor may choose to seek remedy through binding international arbitration. Although Armenian legislation complies with the Trade Related Aspects of Intellectual Properties (TRIPS) Agreement and offers protection of intellectual property rights (IPR), enforcement efforts need improvement.
The Armenian regulatory system lacks transparency. Major sectors of Armenia's economy are controlled by well-connected business people who enjoy government-protected market dominance. Corruption remains a significant obstacle: although the government has introduced a number of reforms over the last few years, and the overall investment climate seems to be incrementally improving, corruption remains a problem in critical areas such as the judiciary, tax and customs operations, health, education, military and law enforcement. Tax and customs procedures, while having improved, still lack transparency. Although the use of reference prices during customs clearance has reduced, it is still not uncommon to see manipulation of the classification of goods that increases costs for economic operators. The court system lacks independence, making it an unreliable forum for resolution of disputes.
Other Useful Links