Congo DR

Sanctions

UN, EU and US Financial and Weapons

FATF AML Deficient List

No

Higher Risk

Non - Compliance with FATF 40 + 9 Recommendations
Not on EU White list equivalent jurisdictions
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Failed States Index (Political Issues)(Average Score)

Medium Risk

Weakness in Government Legislation to combat Money Laundering

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ANTI-MONEY LAUNDERING

 

FATF Status

The Democratic Republic of Congo is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Compliance with FATF Recommendations

The Democratic Republic of Congo has not yet undertaken a Mutual Evaluation Report

 

US Department of State Money Laundering assessment (INCSR)

The Democratic Republic of Congo was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -

 

The Democratic Republic of the Congo (DRC) is not considered an important regional financial center. Nevertheless, its porous borders, weak law enforcement, inadequate judicial system, dollarized economy, and dominant informal sector put the country and its financial system at risk of abuse by criminals seeking to launder money or finance terrorism.  The DRC covers 2.4 million square kilometers and has 7,000 kilometers of often porous borders with nine countries. State authority and administration are weak because of the country’s vast territory and dilapidated infrastructure, among other challenges. Most economic activity in the DRC takes place in the informal sector, estimated to be up to ten times the size of the formal sector, with many transactions, even those of legitimate businesses, carried out in cash (often in U.S. dollars). Its parallel foreign exchange market is large and tolerated by the government.

Inefficient and burdensome customs and tax policies and chronically low public sector salaries encourage a climate of bribery and clandestine transactions, especially in import/export activities and mineral exploitation and sales. Gold, diamonds, and other minerals have long been extensively mined in and sometimes smuggled out of the DRC. Casinos and smuggling of gold, diamonds, and weapons are sources of illicit revenues. Customs and tax fraud, tax evasion, misappropriation of public funds, endemic corruption throughout all sectors of society, sale of prohibited products and services, and a history of state expropriations undercut development of a healthy commercial climate. The DRC does not have any free ports or areas designated as free trade zones.

Certain Congolese and foreign individuals and armed groups contributing to the conflict in the DRC are subject to UN, U.S., and EU sanctions, including an arms embargo that applies to all nongovernmental entities and individuals operating in the DRC. There are travel bans and asset freeze orders against certain members of militia and rebel groups.

 

SANCTIONS

UN, US and EU sanctions currently in force including an assets freeze and travel restrictions on persons acting in violation of the UN arms embargo imposed 2003. Other restrictions relate to political and military leaders of foreign armed groups operating in the DRC, or Congolese militias receiving support from abroad.

In December, 2017, the EU renewed its sanctions against the Democratic Republic of the Congo until 12 December 2018. The sanctions target 16 individuals and consist of an asset freeze as well as a ban on entering the EU

Read Council Decision

In January 2018, the EU confirmed the alignment of the Yugoslav Republic of Macedonia, Montenegro, Albania, Bosnia and Herzegovina, the EFTA countries Iceland and Liechtenstein, the Republic of Moldova and Armenia concerning the restrictive measures in place against the Democratic Republic of the Congo
Read Declaration

 

BRIBERY & CORRUPTION

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           20

World Governance Indicator – Control of Corruption              6

Corruption in the Democratic Republic of the Congo is an endemic problem, and seriously hinders businesses operating in the country. It permeates all levels of government and all sectors of the economy, rendering the country’s investment climate as one of the least competitive in the world. Clientelism, rent-seeking and patronage have decimated fair competition, particularly in the sectors of public procurement and extractive industries. Corruption has also impeded efforts to increase the transparency of government institutions. The ruling elite has a direct stake in the country's economy, and often steer economic activities in accordance to their own personal opportunities. The Penal Code (in French) makes up the country's anti-corruption legislation, yet the relevant laws are very poorly implemented, and government officials engaged in corruption with total impunity. The dysfunctional institutional framework has contributed to the spread of corruption, as well as inflating the country’s informal economy, further impairing competitiveness. Bribery is widespread, to the extent that businesses consider it a routine when carrying out operations. For further information - GAN Integrity Business Anti-Corruption Portal

 

ECONOMY

The economy of the Democratic Republic of the Congo - a nation endowed with vast natural resource wealth - is slowly recovering after decades of decline.

Systemic corruption since independence in 1960, combined with countrywide instability and conflict that began in the early-90s, has dramatically reduced national output and government revenue and increased external debt. With the installation of a transitional government in 2003 after peace accords, economic conditions slowly began to improve as the transitional government reopened relations with international financial institutions and international donors, and President KABILA began implementing reforms. Progress has been slow to reach the interior of the country although clear changes are evident in Kinshasa and Lubumbashi.

Renewed activity in the mining sector, the source of most export income, has boosted Kinshasa's fiscal position and GDP growth in recent years, although recent commodity price declines threaten to erase progress. An uncertain legal framework, corruption, and a lack of transparency in government policy are long-term problems for the large mining sector and for the economy as a whole.

The country marked its thirteenth consecutive year of positive economic expansion in 2015. Much economic activity still occurs in the informal sector and is not reflected in GDP data. The DRC signed a Poverty Reduction and Growth Facility with the IMF in 2009 and received $12 billion in multilateral and bilateral debt relief in 2010, but the IMF at the end of 2012 suspended the last three payments under the loan facility - worth $240 million - because of concerns about the lack of transparency in mining contracts. In 2012, the DRC updated its business laws by adhering to OHADA, the Organization for the Harmonization of Business Law in Africa.

 

Agriculture - products:

coffee, sugar, palm oil, rubber, tea, cotton, cocoa, quinine, cassava (manioc, tapioca), bananas, plantains, peanuts, root crops, corn, fruits; wood products

Industries:

mining (copper, cobalt, gold, diamonds, coltan, zinc, tin, tungsten), mineral processing, consumer products (textiles, plastics, footwear, cigarettes), metal products, processed foods and beverages, timber, cement, commercial ship repair

Exports - commodities:

diamonds, copper, gold, cobalt, wood products, crude oil, coffee

Exports - partners:

China 43.5%, Zambia 25%, South Korea 4.9%, Belgium 4.8% (2015)

Imports - commodities:

foodstuffs, mining and other machinery, transport equipment, fuels

Imports - partners:

China 20.6%, South Africa 17.7%, Zambia 12.3%, Belgium 6.9%, Zimbabwe 5.1%, India 4.7% (2015)

Investment Climate  -  US State Department

The Democratic Republic of the Congo (DRC) has an estimated $24 trillion worth of natural resources, yet 70 percent of its population lives on less than one dollar a day. With 80 million hectares (197 million acres) of arable land and over 1,100 minerals and precious metals identified, the DRC has the potential to become one of the richest countries on the African continent and a catalyst for African growth. Though the DRC’s political and security situation remains fragile, the economy is expected to grow at a rate of roughly 5 percent in 2016, largely driven by the extractive sector with contributions from the public and tertiary sectors. Since 2010, the Government of the DRC (GDRC) has demonstrated a growing commitment to foster sound economic governance and attract foreign direct investment (FDI). The DRC’s overall economic forecast for the medium term remains largely positive despite the impact of low global commodity prices and continuing political uncertainty.

After an economic slump during the global financial crisis that lowered gross domestic product (GDP) growth to 2.8 percent in 2009, the DRC posted an annual average economic growth of 7.7 percent between 2010 and 2014, and 8.8 percent in 2015, well above the average in sub-Saharan Africa. This performance was driven by robust growth in the extractive sector and favorable trends in commodity prices. Lower commodities prices more recently have lowered growth projections for 2016 to around 5 percent. Inflation, which reached a staggering 53 percent in 2009, was an estimated 1 percent in 2015 largely owing to more conservative fiscal and monetary policies. The government’s Competitiveness and Private Sector Development Project reduced business start-up time by half and reduced the number of taxes from 118 to 30.

Though rehabilitation of basic infrastructure also contributed to economic recovery, the GDRC continues to struggle to improve the quality of transportation networks. As an example, of 1,530 km (950 miles) of road in the east, only a third is in good condition. The Congo River system, the world’s second largest river by flow after the Amazon River, has great potential for hydroelectric power generation. The country’s two largest dams, Inga I and II, built in 1972 and 1982 respectively, have a combined generating capacity of close to 2,000 megawatts, yet actually generate only half of their total capacity due to poor upkeep. The Congo River has the potential to generate up to 100,000 megawatts of electricity, though today less than ten percent of Congolese have access to electricity. The GDRC seeks foreign investment partnerships on several hydropower projects, including an expansion of Inga, as well as construction of new transmission lines and geothermal power stations in the east.

Implementation of macroeconomic and fiscal reforms have led to growth in the banking sector and increased microfinance projects. Though a recovery in the banking sector has encouraged commercial and private borrowing, the Central Bank of Congo (BCC) has recently tightened borrowing requirements and access to credit in an effort to maintain stable exchange and inflation rates. The GDRC is also taking steps toward mitigating the impact of low commodity prices on the broader economy through a push for diversification, targeting key sectors including agriculture, telecommunication and energy. Through diversification and reform, the DRC hopes to improve its business climate and attract more investment. Toward this end, the GDRC has created the legal framework for Special Economic Zones (SEZs), including industrial agribusiness parks, and is looking to partner with American businesses. The first SEZ has been established in Maluku in Kinshasa province, although operations had not started as at June 2016.

In 2014, the DRC joined the Organization for the Harmonization of Business Laws in Africa (OHADA) to protect investors by modernizing the business code and settling disputes through supranational arbitration. OHADA provides multiple incentives for foreign investment by standardizing and streamlining enterprise creation and contract enforcement as well as providing investor protection and harmonization of accounting principles. Moreover, GDRC investment reforms and investor protections make Public-Private Partnerships (PPPs) more secure and attractive for outside investors. In its third year of existence, the DRC American Chamber of Commerce continues to be a forum and network for American business interests in DRC.

The U.S. Financial Reform Act (Dodd-Frank Act) requires companies whose products contain tin, tantalum, tungsten or gold to disclose to U.S. regulators whether they are sourcing these materials from the DRC or its neighbors. Companies must also document their due diligence to ensure their sourcing arrangements are not benefiting armed groups. The State Department and USAID work with the private sector, government, civil society, and international partners to develop pilot supply chains of artisanally-mined conflict-free minerals out of the eastern Congo. The Congolese Army’s 2013 victory against rebel M23 combatants and the conclusion of a regional peace agreement in Addis Ababa the same year have helped focus the GDRC on eliminating other armed groups and encouraging economic development and restoration of state authority in the eastern DRC, though security issues remain a concern in many parts of the east.

Overall, businesses in the DRC faces numerous challenges, including fragility of functional infrastructure, endemic corruption at virtually all levels of government, predatory tax agencies, limited access to capital, shortage of skilled labor, difficulty enforcing contracts, political uncertainty, weak judicial system, and ongoing armed conflict in eastern DRC. 

 

Country Links

Central Bank of Congo

Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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