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 Follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Colombia was undertaken in 2023. According to that Evaluation, Colombia was deemed Compliant for 12 and Largely Compliant for 18 of the FATF 40 Recommendations. It remains 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 a rigorous money laundering detection regime; however, not all anti-money laundering/combating the financing of terrorism (AML/CFT) compliance systems are in line with risk-based best practices, creating significant gaps in the supervision of designated nonfinancial businesses and professions (DNFBPs).  According to the Colombian National Risk Evaluation Report conducted by the Financial Analysis and Information Unit (UIAF), criminal activities that registered the highest money laundering threat were public corruption, narcotrafficking, and trade-based money laundering (TBML).

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           40

World Governance Indicator – Control of Corruption             41

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

With improving security conditions in metropolitan areas, a market of 51.8 million people, an abundance of natural resources, and an educated and growing middle-class, Colombia continues to be an attractive destination for foreign investment in Latin America. While direct foreign investment remained strong in 2022, President Gustavo Petro, Colombia’s first-ever leftist president who took office in August 2022, has supported the concept of domestic sovereignty in key economic sectors, creating high levels of uncertainty within the private sector.

The Colombian economy grew by 7.5% in 2022, the highest growth in the hemisphere among OECD countries and the second-highest growth rate within the OECD as a whole. This strong positive growth, for the second consecutive year, is a sign of economic stabilization after the disruptions caused by the COVID crisis and related social unrest. Growth in 2022 was concentrated in the performance of the commerce sector (which contributed 4.5 percentage points), manufacturing industries (especially in textiles), and artistic and entertainment activities and was boosted by high commodity prices. While agricultural exports continued to expand, the sector at large was harmed by rising prices of fertilizer following the Russian invasion of Ukraine. In July 2021, rating agencies Fitch and Standard & Poor’s (S&P) downgraded Colombia below investment grade status. The Colombian government passed a tax reform that came into effect in January 2023, seeking to reactivate the economy, generate employment, and contribute to the fiscal stability of the country. The government also plans health, labor, and pension reforms, which has caused some concerns among investors. According to the Fedesarrollo and Colombian Stock Exchange Financial Opinion survey (EOF), economic analysts forecast a median 1.1% GDP growth for 2023.

Colombia’s legal and regulatory systems generally are transparent and consistent with international norms. The country has a comprehensive legal framework for business and foreign direct investment (FDI). The 2012 U.S.-Colombia Trade Promotion Agreement (CTPA) has strengthened bilateral trade and investment. Colombia’s dispute settlement mechanisms have improved through the CTPA and several international conventions and treaties. Weaknesses include protection of intellectual property rights (IPR), as Colombia has yet to implement certain IPR-related CTPA provisions. Colombia became the 37th member of the Organization for Economic Cooperation and Development (OECD) in 2020, bringing an obligation to adhere to OECD norms and standards in economic operations.

The Colombian government has made a concerted effort to develop efficient capital markets, attract investment, and create jobs; however, restrictions on foreign ownership in specific sectors still exist. According to the Colombian Central Bank, FDI grew 57.7% between 2021 and 2022. Roughly half of the Colombian workforce in metropolitan areas is employed in the informal economy, a figure that increases to four-fifths in rural areas. According to the Colombian Statistics Department (Dane), there were 22.4 million employed people, a 973,000 increase over 2021. In December 2022, Colombia’s unemployment rate was 10.3% (or 2.5 million people), 1.2% below December 2021.
Since the 2016 peace agreement between the government and the demobilized Revolutionary Armed Forces of Colombia (FARC), Colombia has experienced a significant decrease in terrorist activity. Several powerful narco-criminal operations still pose threats to commercial activity and investment, especially in rural zones outside of government control. The Petro administration is seeking negotiations with illegal armed groups not part of the prior peace accord under a policy called “Total Peace.” Results have varied as official negotiations with political groups have been slow, and most armed groups escalated violence by engaging in turf wars with one another. The presence of illicit economies run by armed groups, often entangled in legal supply chains in some parts of Colombia, presents a challenge to the development of reliable, sustainable livelihoods.
Corruption remains a significant challenge. The Colombian government continues to work on improving its business climate, but U.S. and other foreign investors voice complaints about non-tariff, regulatory, and bureaucratic barriers to trade, investment, and market access at the national, regional, and municipal levels. Stakeholders express concern that some regulatory rulings in Colombia target specific companies, resulting in an uneven playing field. Investors generally have access at all levels of the Colombian government but cite a lack of effective and timely consultation with regulatory agencies in decisions that affect them. Investors also note concern regarding the national competition and regulatory authority’s (Superintendencia de Industria y Comercio, SIC) differing rulings for different companies on similar issues, and slow processing at some regulatory agencies, such as at food and drug regulator INVIMA.

Country Links

Superintendencia Financiera de Colombia

Unidad de Informacion y Analisis Financiero (UIAF)

Unified Commercial and Social Registry (RUES)