CFATF Statement re AML Strategic Deficiencies: 3 June 2015
In May 2015 the Caribbean Financial Action Task Force (CFATF) acknowledged the significant progress made by Belize in improving its AML/CFT regime and notes that Belize has established the legal and regulatory framework to meet its commitments in its agreed Action Plan regarding the strategic deficiencies that the CFATF had identified. Belize is therefore no longer subject to the CFATF ICRG monitoring process.
Compliance with FATF Recommendations
The May 2015 CFATF Plenary recognised that Belize had made significant progress in addressing the deficiencies identified in their 2011 Mutual Evaluation Report and therefore exited the follow-up process.
Belize has addressed the deficiencies noted in the Core and Key Recommendations rated PC/NC (R. 1, 4, 5, 10, 13, 23, 35, 40, SR. I – V) to a level of compliance that is comparable to at least an LC.
US Department of State Money Laundering assessment (INCSR)
Belize is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes
Belize’s geographical location, porous borders, poverty, and limited material and personnel resources leave it vulnerable to illicit trafficking, illegal migration, transnational criminal organizations, and corruption. Its sources of money laundering are drug trafficking, tax evasion, securities fraud, and conventional structuring schemes. The government is taking steps to close those vulnerabilities. Belize has an active offshore financial sector but is not a key regional financial player. There are two relatively unmonitored FTZs that are used to move money internationally.
Belize is building its FIU’s capacity and, with donor assistance, developed a multi-agency Financial Crime Working Group. Belize is still primarily a cash economy with declining numbers of businesses using the formal sector.
EU Commission Tax Blacklist
On March 12, 2019, the EU Commission confirmed that Belize had not delivered on their commitments since the first blacklist adopted in 2017 and, therefore, it will be placed on the EU Tax Blacklist.
On 8th November 2019, the EU Commission that Belize has passed the necessary reforms to improve its tax regime for international business companies that was due to be implemented by end 2018. Belize will therefore be moved from annex I of the conclusions to annex II, pending the implementation of the country's commitment to amend or abolish the harmful features of its foreign source income exemption regime by end 2019.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 52
World Governance Indicator – Control of Corruption 46
Tourism is the number one foreign exchange earner in this small economy, followed by exports of crude oil, marine products, sugar, citrus, and bananas.
The government's expansionary monetary and fiscal policies, initiated in September 1998, led to GDP growth averaging nearly 4% in 1999-2007. Oil discoveries in 2006 bolstered this growth and oil exploration continues, but production has fallen in recent years and future oil revenues remain uncertain. Growth slipped to 0% in 2009, due to the global economic slowdown, natural disasters, and a temporary drop in the price of oil, but growth grew to 2.2% in 2015.
Although Belize has the third highest per capita income in Central America, the average income figure masks a huge income disparity between rich and poor, and a key government objective remains reducing poverty and inequality with the help of international donors. High unemployment, a growing trade deficit and heavy foreign debt burden continue to be major concerns.
Agriculture - products:
bananas, cacao, citrus, sugar; fish, cultured shrimp; lumber
garment production, food processing, tourism, construction, oil
Exports - commodities:
sugar, bananas, citrus, clothing, fish products, molasses, wood, crude oil
Exports - partners:
UK 30.8%, US 18.7%, Nigeria 6.7%, Trinidad and Tobago 4.8%, Ireland 4.2%, Jamaica 4.2% (2015)
Imports - commodities:
machinery and transport equipment, manufactured goods; fuels, chemicals, pharmaceuticals; food, beverages, tobacco
Imports - partners:
US 26.6%, Mexico 11.7%, Cuba 10.2%, Guatemala 9%, China 7.5%, Trinidad and Tobago 5.6% (2015)
Investment Climate - US State Department
Belize has the smallest economy in Central America with a total gross domestic product (GDP) of US $1.6 billion. Though geographically located in Central America, the former British Colony has cultural ties to the Caribbean as well. Due to mounting fiscal pressures and a need to diversify and expand its economy, the Government of Belize (GOB) is very open to, and actively seeking, foreign direct investment (FDI). However, the small population of the country (around 350,000 people), high import duties, difficulties in navigating the government bureaucracy and occasional political interference in private disputes constitute investment challenges.
Generally, Belize has no restrictions on foreign ownership and control of companies. Nevertheless, Small and Medium sized enterprises (SMEs) wishing to benefit from certain incentives and tour operators need to have 51% local ownership. Additionally, the jurisdiction is attractive for some investors as there are no capital gains tax and no inheritance tax. The country continues to fare poorly in international surveys of openness and ease of opening a business. Some investors complain that they do not always receive the full extent of the incentives available, that land title is not always reliable and secure, and that bureaucratic delays or corruption can be hindrances to starting a business in Belize.
Major U.S. investments in Belize exist today in the tourism, sugar, and other agricultural industries, as well as oil exploration. However, known petroleum reserves are on the decline and are close to depletion. Investors have also enjoyed success recently with business process outsourcing (BPOs). Economic growth in Belize continues to focus heavily on tourism and agriculture. These sectors remain the top areas for expansion and investment.
The overall fiscal picture for Belize shows significant challenges in the years ahead. In September 2012, Belize undertook a selective default of its major external commercial debts totaling an estimated U.S. $554 million, commonly referred to as the Superbond. In 2013, Belize restructured its sovereign debt of U.S. $547.5 million with a maturity date of 2038. The interest rate of the payments on the superbond will increase in 2017 from 5% to 6.767% and principal payments start becoming due in 2019. Belize has also been a beneficiary of the Petro Caribe oil initiative with Venezuela – a “loan” in which Belize pays Venezuela 50% up front for fuel and repays the rest at 1% interest over 25 years, allowing it to “hold back” 50% of the cost of fuel to use for other needs. However, with the decrease of the price of oil, the benefits of the program to Belize have become minimized and it is uncertain how long Venezuela will be able to continue the program.
Skeptics express concerns whether the Government of Belize (GOB) investment in infrastructure development is too ambitious and whether the country will begin seeing the economic benefits in time to assist with the looming debt. At the close of 2015, GOB’s total public debt stood at U.S. $1.4 billion accounting for 79% of GDP.
The GOB also recently negotiated a settlement for compensation over the nationalization of Belize Electricity Limited, and it has also negotiated compensation over the nationalization of Belize Telemedia Limited, but the total settlement a final judgment via arbitration. Finally, several banks in Belize have lost access to correspondent banking services from major U.S. banks making it difficult (and more expensive) to process international financial transactions with the United States.
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