Colombia

Sanctions

No

FATF AML Deficient List

No

Higher Risk

US Dept of State Money Laundering Assessment 
Not on EU White list equivalent jurisdictions
Failed States Index (Political Issues)(Average Score)
International Narcotics Control Majors List

Medium Risk

Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)

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ANTI-MONEY LAUNDERING

 

FATF Status

Colombia 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 Colombia was undertaken in 2018. According to that Evaluation, Colombia was deemed Compliant for 9 and Largely Compliant for 14 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 4 of the Effectiveness & Technical Compliance ratings.

 

US Department of State Money Laundering assessment (INCSR)

Colombia is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes. 

OVERVIEW

 

Colombia has one of Latin America’s most rigorous AML systems, but money laundering exists throughout its economy, especially involving proceeds from drug trafficking, illegal mining, extortion, and corruption.  In August 2018, President Ivan Duque’s Administration announced it would target money laundering as one of its “top ten” priority crimes and increase the use of asset forfeiture.  Colombia has an impressive ability to detect money laundering and should continue to improve interdiction, prosecution, and interagency cooperation in order to implement an effective and efficient AML regime.

 

 

SANCTIONS

There are no international sanctions currently in force against this country.

 

BRIBERY & CORRUPTION

 

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           36

World Governance Indicator – Control of Corruption             44

Corruption is a serious obstacle for companies operating or planning to invest in Colombia. Corruption permeates several sectors of the Colombian economy. The same applies to government hierarchy where corruption cases in the high echelons are as big an obstacle for a transparent and efficient administration as it is for a competitive investment climate. The large networks of clientelism are particularly manifested in the public contracting sector. The Colombian Penal Code and the Anti-Corruption Act criminalizes several forms of corruption including active and passive bribery, extortion, abuse of office and the bribery of foreign officials. Gifts and facilitation payments are also prohibited under Colombian laws. Nonetheless, these practices are widespread. The government generally implemented anti-corruption laws effectively, despite some instances of official impunity being reported. For further information - GAN Integrity Business Anti-Corruption Portal

 

ECONOMY

Colombia's consistently sound economic policies and aggressive promotion of free trade agreements in recent years have bolstered its ability to weather external shocks. Colombia depends heavily on energy and mining exports, making it vulnerable to a drop in commodity prices. Colombia is the world's fourth largest coal exporter and Latin America's fourth largest oil producer. Economic development is stymied by inadequate infrastructure, inequality, poverty, narcotrafficking and an uncertain security situation.

Declining oil prices have resulted in a drop in government revenues. In 2014, Colombia passed a tax reform bill to offset the lost revenue from the global drop in oil prices. The SANTOS administration is also using tax reform to help finance implementation of a peace deal between FARC and the government. Colombian officials estimate a peace deal may bolster economic growth by up to 2%.

Despite austerity measures put in place by the SANTOS administration, GDP and foreign direct investment fell in 2015, while the El Nino weather phenomenon caused food and energy prices to rise, with inflation spiking to 6.8%. In order to combat inflation, the Central Bank raised interest rates four times during the last four months of 2015, ending the year with a 25 basis point increase to 5.75%. Unemployment has continued to decrease and hit a record low of 8.9% in 2015, but the rate is still one of Latin America's highest. Nevertheless, Colombia’s GDP growth rate makes it the region’s best performer among large economies in 2015.

Real GDP growth averaged 4.8% per year from 2010-2014, continuing a decade of strong economic performance, before dropping in 2015. All three major ratings agencies upgraded Colombia's government debt to investment grade in 2013 and 2014, which helped to attract record levels of investment, mostly in the hydrocarbons sector. However, Standard & Poor’s downgraded its long-term outlook from stable to negative in early 2016. The change, due largely to falling government revenues, could cause Colombia to lose its investment-grade bond status.

The SANTOS Administration's foreign policy has focused on bolstering Colombia's commercial ties and boosting investment at home. Colombia has signed or is negotiating Free Trade Agreements (FTA) with more than a dozen countries; the US-Colombia FTA went into force in May 2012. The US and Colombia have benefitted from the FTA, but Colombia’s ability to take full advantage of its enhanced access to American markets continues to be constrained by lack of export diversification. Nontariff measures remain a point of contention for bilateral trade relations. Truck scrappage regulation, and restrictions on liquor, pharmaceutical, and ethanol imports are top irritants in the bilateral trade relationship. Colombia is a founding member of the Pacific Alliance - a regional trade block formed in 2012 by Chile, Colombia, Mexico, and Peru to promote regional trade and economic integration. In 2013, Colombia began its accession process to the OECD.

Agriculture - products:

coffee, cut flowers, bananas, rice, tobacco, corn, sugarcane, cocoa beans, oilseed, vegetables; shrimp; forest products

Industries:

textiles, food processing, oil, clothing and footwear, beverages, chemicals, cement; gold, coal, emeralds

 

Exports - commodities:

petroleum, coal, emeralds, coffee, nickel, cut flowers, bananas, apparel

Exports - partners:

US 27.5%, Panama 7.2%, China 5.2%, Spain 4.4%, Ecuador 4% (2015)

Imports - commodities:

industrial equipment, transportation equipment, consumer goods, chemicals, paper products, fuels, electricity

 

Imports - partners:

US 28.8%, China 18.6%, Mexico 7.1%, Germany 4.2% (2015)

Investment Climate  -  US State Department

With increased security, a market of 48 million people, an abundance of natural resources, and an educated and growing middle-class, Colombia is an attractive destination for foreign investment. The Colombian government has taken significant steps to open the country to global trade and investment. In 2015, Colombia had the fourth largest GDP in Latin America after Brazil, Mexico, and Argentina and has sustained an average growth rate over four percent for the past decade. In the World Bank’s 2016 Ease of Doing Business Report, Colombia ranked 54 out of 189 countries and fourth in the region, behind Mexico, Chile, and Peru. Colombia has weathered low world oil prices and a significant devaluation of the peso to remain among the more attractive investment destinations in South America.

Colombia’s legal and regulatory systems are generally transparent and consistent with international norms. The country has a comprehensive legal framework for business and foreign direct investment (FDI), and the U.S.-Colombia Trade Promotion Agreement (CTPA), which took effect on May 15, 2012, has strengthened bilateral trade and investment. Through the CTPA and several international conventions and treaties, Colombia’s dispute settlement mechanisms and intellectual property rights protections have improved. However, piracy and counterfeit products are a major problem and among the primary reasons Colombia remains on the U.S. Trade Representative’s Special 301 Watch List.

The Colombian government has made a concerted effort to develop efficient capital markets, attract investment, and create jobs. Sound fiscal and macroeconomic management has allowed Colombia to claim the triple crown of seeing its credit ratings increased to ‘Investment Grade’ level by Standard and Poor’s, Moody’s, and Fitch Ratings. Nevertheless, S&P recently downgraded Colombia’s long-term outlook form stable to negative. Restrictions on foreign ownership in specific sectors still exist, and FDI fell 26 percent in the first three quarters of 2015 relative to 2014, largely due to reduced investment in the extractives industry. Colombia’s average annual unemployment rate continued its downward trend in 2015 and reached 8.9 percent. However, about 47 percent of the workforce is in the informal economy according to the National Administrative Department of Statistics (DANE). Colombia enjoys a skilled workforce throughout the country, as well as managerial-level employees who are often bilingual.

Security in Colombia has improved significantly in recent years, with the percentage of kidnappings down 93 percent since 1999. Colombian government figures show that the number of terrorist acts decreased 42 percent from 2014 to 2015 and homicides continued a downward trend, decreasing five percent. Since November 2012, the Colombian government and the Revolutionary Armed Forces of Colombia (FARC) have been conducting peace negotiations in Havana, Cuba. Significant progress has been achieved in the negotiations and the Colombian government expects to conclude a comprehensive agreement in 2016. Even so, an active domestic insurgency is still taking place alongside powerful narco-criminal group operations, posing a threat to commercial activity and investment, especially in rural zones where government control is weaker.

Many majority state-owned enterprises, including Ecopetrol and ISA, are considered models of professional management, competition, and excellent corporate governance. However, corruption remains a significant challenge in Colombia. Though Colombia rose for the second consecutive year in the World Economic Forum’s Global Competitiveness Index (2015-2016), the report cited security and corruption as among the biggest challenges for doing business in Colombia. The Colombian government continues to work on improving its business climate, but over the past year U.S. and other foreign investors have voiced growing complaints about non-tariff and bureaucratic barriers to trade and investment at the national, regional, and municipal levels.

 

Country Links
Superintendencia Financiera de Colombia
Unidad de Informacion y Analisis Financiero (UIAF)
Unified Commercial and Social Registry (RUES)
Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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