Belarus 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 Belarus was undertaken in 2019. According to that Evaluation, Belarus was deemed Compliant for 12 and Largely Compliant for 25 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 5 of the Effectiveness & Technical Compliance ratings.
US Department of State Money Laundering assessment (INCSR)
Belarus 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: -
Belarus is not a major financial center. Corruption and illegal narcotics trafficking are primary sources of illicit proceeds. Economic decision-making in Belarus is highly concentrated within the top levels of government and, ultimately, in the presidency. The concentration of power in the hands of the presidency and the lack of a system of checks and balances among the various branches of government are the greatest hindrances to the rule of law and transparency of governance. Government financial institutions have little autonomy, and the financial sector is not sufficiently transparent and accountable. The substantial liberalization of the national currency exchange rate policies, coupled with tighter monetary policies, contributed to a decreased use of the dollar and euro in 2015 and significantly curbed foreign currency cash transactions’ avoidance of the banking system. That also helped reduce the potential for off- book cash transactions and underground markets in 2015.
Trade-based money laundering occurs primarily between Russian and Belarusian businesses. Front companies are often involved and funds sometimes transferred for products that are never delivered. The Belarusian financial intelligence unit (FIU) noted increased efforts in 2015 to transfer funds from Russia to third countries via the Belarusian banking system, as an apparent consequence of Western sanctions against Russia.
There are many casinos, especially in the capital, Minsk, and foreign ownership is allowed. In 2013, the government introduced an automatic system to register winnings in legal gambling, which enables the real time registration of winnings. In 2014, the government passed various resolutions to tighten internal control in the gaming industry and issued risk management recommendations for such businesses. In 2015, the government upgraded and streamlined the system of registering financial operations in gambling via the introduction of an electronic data exchange.
Since 2006, Belarus has been the subject of numerous U.S. sanctions. In 2011, the United States reauthorized the Belarus Democracy and Human Rights Act of 2004, which includes a package of sanctions expanding the list of Belarusian officials and law enforcement representatives subject to visa bans and financial restrictions. The United States also extended limitations on trade with Belarus under the International Emergency Economic Powers Act. In May 2012, the U.S. Treasury designated Belarus-based JSC CredexBank (renamed JSC InterPayBank) as a financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act.
In March 2015, the U.S. Secretary of State decided to terminate sanctions imposed in 2011 on Belarusneft, a state-owned Belarussian energy company, for its involvement in the Iranian petroleum sector because the company is no longer engaging in sanctionable activity. In October 2015, the Department of the Treasury, in consultation and coordination with the Department of State, authorized general license transactions involving nine Belarusian entities pursuant to Executive Order 13405. The authorization expires on April 30, 2016, unless extended or revoked. The United States took this step in light of the positive move by the Belarusian government to release six political prisoners in August 2015.
In October 2015, the EU Council suspended for four months the asset freeze and travel ban applying to 170 individuals and the asset freeze applying to three entities in Belarus. This included the asset freeze on President Lukashenko. This decision was taken in response to the release of all Belarusian political prisoners on 22 August and in the context of improving EU-Belarus relations. The EU will continue to closely monitor the situation of democracy and human rights in Belarus.
Restrictive measures against persons and entities were due to expire on 31 October, 2015. The Council prolonged these measures for four months, until 29 February 2016, and at the same time suspended them for 170 persons and for three entities. Four persons involved in unresolved disappearances in Belarus remain subject to restrictive measures. The arms embargo also continues to apply.
On the same date the US Department of Treasury, Office of Foreign Assets Control (OFAC) issued a general license that permits US persons to engage in transactions with certain Belarus-based companies that have been designated as Specially Designated Nationals (SDNs), as well as entities owned 50 percent or more by the entities identified in the general license. The general license is valid for six months unless OFAC revokes or extends it.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 47
World Governance Indicator – Control of Corruption 54
Corruption is present at all government levels in Belarus; customs, public procurement and construction are particularly vulnerable sectors. Companies are likely to face discrimination and corruption in public procurement in favor of state-owned enterprises, and making informal payments or giving gifts to secure government contracts are common practices when doing business in the country. While petty corruption is relatively limited, high level corruption occurs with impunity. The Criminal Code of the Republic of Belarus criminalizes attempted corruption, extortion, active and passive bribery, bribery of foreign officials and money laundering, but anti-corruption regulations are vague and require improvement. In addition, anti-corruption laws have been poorly enforced and officials engage in corruption with impunity. The legal status of facilitation payments is uncertain. For further information - GAN Integrity Business Anti-Corruption Portal
As part of the former Soviet Union, Belarus had a relatively well-developed, though aging industrial base; it retained this industrial base - which is now outdated, energy inefficient, and dependent on subsidized Russian energy and preferential access to Russian markets - following the breakup of the USSR. The country also has a broad agricultural base which is largely inefficient and dependent on government subsidies. After an initial burst of capitalist reform from 1991-94, including privatization of smaller state enterprises and some service sector businesses, creation of institutions of private property, and development of entrepreneurship, Belarus' economic development greatly slowed. About 80% of all industry remains in state hands, and foreign investment has been hindered by a climate hostile to business. A few banks, which had been privatized after independence, were renationalized. State banks account for 75% of the banking sector.
Economic output, which had declined for several years following the collapse of the Soviet Union, revived in the mid-2000s due to the boom in oil prices. Belarus has only small reserves of crude oil, though it imports most of its crude oil and natural gas from Russia at prices substantially below the world market. Belarus exported refined oil products at market prices produced from Russian crude oil purchased at a steep discount. In late 2006, Russia began a process of rolling back its subsidies on oil and gas to Belarus. Tensions over Russian energy reached a peak in 2010, when Russia stopped the export of all subsidized oil to Belarus save for domestic needs. In December 2010, Russia and Belarus reached a deal to restart the export of discounted oil to Belarus. In 2015, Belarus continued to import Russian crude oil at a discounted price. However, the plunge in global oil prices heavily reduced revenues.
Little new foreign investment has occurred in recent years. In 2011, a financial crisis began, triggered by government directed salary hikes unsupported by commensurate productivity increases. The crisis was compounded by an increased cost in Russian energy inputs and an overvalued Belarusian ruble, and eventually led to a near three-fold devaluation of the Belarusian ruble in 2011. In November 2011, Belarus agreed to sell to Russia its remaining shares in Beltransgaz, the Belarusian natural gas pipeline operator, in exchange for reduced prices for Russian natural gas. Receiving part of a $3 billion loan from the Russian-dominated Eurasian Economic Community (EurAsEC) Bail-out Fund, a $1 billion loan from the Russian state-owned bank Sberbank, and the $2.5 billion sale of Beltransgaz to Russian state-owned Gazprom helped stabilize the situation in 2012; nevertheless, the Belarusian currency lost more than 60% of its value, as the rate of inflation reached new highs in 2011 and 2012, before calming in 2013. In December 2013, Russia announced a new loan for Belarus of up to $2 billion for 2014. Notwithstanding foreign assistance, the Belarusian economy continued to struggle under the weight of high external debt servicing payments and trade deficit. In mid-December 2014, structural economic shortcomings were aggravated by the devaluation of the Russian ruble and triggered a near 40% devaluation of the Belarusian ruble. Belarus entered 2015 with stagnant economic growth and reduced hard currency reserves, with under one month of import cover.
Agriculture - products:
grain, potatoes, vegetables, sugar beets, flax; beef, milk
metal-cutting machine tools, tractors, trucks, earthmovers, motorcycles, televisions, synthetic fibers, fertilizer, textiles, radios, refrigerators
Exports - commodities:
machinery and equipment, mineral products, chemicals, metals, textiles, foodstuffs
Exports - partners:
Russia 39%, UK 11.2%, Ukraine 9.5%, Netherlands 4.3%, Germany 4.1% (2015)
Imports - commodities:
mineral products, machinery and equipment, chemicals, foodstuffs, metals
Imports - partners:
Russia 56.6%, China 7.9%, Germany 4.6% (2015)
Investment Climate - US State Department
The Government of Belarus (GOB) officially welcomes foreign investment, which is seen as a source of new production technologies, jobs, and hard currency. The Investment Code of the Republic of Belarus (passed on June 22, 2001) is the regulatory framework governing all forms of investment activities in Belarus. Several presidential edicts and decrees have been issued that also regulate investment activities.
Belarusian authorities note the geographic location of Belarus, its inclusion in the Eurasian Economic Union (which also includes Russia, Kazakhstan, Armenia, and Kyrgyzstan), robust infrastructure, highly-skilled workforce, and six free economic zones as reasons to invest in Belarus.
The government has placed a priority on investments in pharmaceuticals; biotechnology; nanotechnologies and nanomaterials; petrochemicals and chemicals; mechanical engineering industry and production of machines and equipment; transport and related infrastructure; civil engineering; production of construction materials; agriculture; the food industry; information and communication technologies; and tourism.
Regulations on investment provide for the following forms of investment activities in Belarus:
Green field: establishing a legal entity (joint ventures and foreign enterprises);
Brown field: property or property rights acquisition, i.e.: share in charter capital, real estate, securities, intellectual property rights, concession, equipment and other permanent assets.
The government has been very cautious to privatize state property; investments in sectors dominated by state-owned enterprises have, at times, come under threat from regulatory bodies.
The government also claims there are no specific requirements for foreigners wishing to establish a business in Belarus. Investors, whether Belarusian or foreign, allegedly benefit from equal legal treatment and have the same right to conduct business operations in Belarus. However, according to numerous informal sources in the local business community and independent media, the existing laws and practices often discriminate against the private sector, including foreign investors, regardless of the country of their origin.
In April 2011, Belarus established the state organization “National Agency of Investments and Privatization,” which was tasked with facilitating and expediting foreign investment and privatization in the economy. The Agency has focused on organizing fact-finding missions to Belarus, joint investment and business forums abroad, and packaging investment proposals for potential investors.
Nevertheless, both the central and local governments’ policies often reflect an old-fashioned Soviet-style distrust of private enterprise – whether local or foreign. Although technically the legal regime for foreign investments should not be less advantageous than the one for domestic investments, FDI in many key sectors and many of the most profitable business areas in Belarus is not welcomed. For example, refining crude oil, trade in tobacco and alcohol, lotteries, etc. have been taken over by private domestic businesses connected to the Presidential Administration.
FDI is prohibited in the following areas:
defense and security issues in Belarus;
production and distribution of narcotic, dangerous and toxic substances.
The Department of Financial Monitoring of the State Control Committee of the Republic of Belarus (DFM)
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