Costa Rica

Sanctions

No

FATF AML Deficient List

No

Higher Risk

US Dept of State Money Laundering Assessment 
Not on EU White list equivalent jurisdictions
International Narcotics Control Majors List

Medium Risk

Non - Compliance with FATF 40 + 9 Recommendations
Weakness in Government Legislation to combat Money Laundering
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Failed States Index (Political Issues)(Average Score)

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ANTI-MONEY LAUNDERING

 

FATF Status

Costa Rica 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 follow-up relating to the implementation of anti-money laundering and counter-terrorist financing standards in Costa Rica was undertaken in 2018. According to that Evaluation, Costa Rica was deemed Compliant for 17 and Largely Compliant for 18 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 1 of the Effectiveness & Technical Compliance ratings.

 

US Department of State Money Laundering assessment (INCSR)

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

OVERVIEW

 

Transnational criminal organizations employ Costa Rica as a base for financial crimes due to enforcement challenges and its location on a key transit route for narcotics trafficking.  Costa Rica improved its legal framework for supervision and enforcement and is steadily advancing implementation of new legislation and money laundering prevention mechanisms.  Gaps remain, however, and additional resources for key units, stand-alone asset forfeiture legislation, and enhanced penalties for financial crimes could mitigate current challenges.   

 

 

SANCTIONS

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

 

 

BRIBERY & CORRUPTION

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           56

World Governance Indicator – Control of Corruption             67

 

ECONOMY

Prior to the global economic crisis, Costa Rica enjoyed stable economic growth. The economy contracted in 2009 but resumed growth at about 4% per year in 2010-15. While traditional agricultural exports of bananas, coffee, sugar, and beef are still the backbone of commodity export trade, a variety of industrial and specialized agricultural products have broadened export trade in recent years. High value-added goods and services, including medical devices, have further bolstered exports. Tourism continues to bring in foreign exchange, as Costa Rica's impressive biodiversity makes it a key destination for ecotourism.

Foreign investors remain attracted by the country's political stability and relatively high education levels, as well as the incentives offered in the free-trade zones; Costa Rica has attracted one of the highest levels of foreign direct investment per capita in Latin America. The US-Central American-Dominican Republic Free Trade Agreement (CAFTA-DR) entered into force on 1 January 2009 after significant delays within the Costa Rican legislature. CAFTA-DR has increased foreign direct investment in key sectors of the economy, including the insurance and telecommunications sectors. However, poor infrastructure, high energy costs, bureaucracy, weak investor protection, and legal uncertainty due to the difficulty of enforcing contracts and overlapping and at times conflicting responsibilities between agencies, remain impediments to greater competitiveness.

Costa Rica’s economy also faces challenges due to a rising fiscal deficit, rising public debt, and relatively low levels of domestic revenue. Poverty has remained around 20-25% for nearly 20 years, and the strong social safety net that had been put into place by the government has eroded due to increased financial constraints on government expenditures. Unlike the rest of Central America, Costa Rica is not highly dependent on remittances, which in 2014 represented 1% of GDP. Immigration from Nicaragua has increasingly become a concern for the government. The estimated 300,000-500,000 Nicaraguans in Costa Rica, legally and illegally, are an important source of mostly unskilled labor, but also place heavy demands on the social welfare system.

 

Agriculture - products:

bananas, pineapples, coffee, melons, ornamental plants, sugar, corn, rice, beans, potatoes; beef, poultry, dairy; timber

Industries:

medical equipment, food processing, textiles and clothing, construction materials, fertilizer, plastic products

 

Exports - commodities:

bananas, pineapples, coffee, melons, ornamental plants, sugar; beef; seafood; electronic components, medical equipment

Exports - partners:

US 33.6%, China 6.2%, Mexico 4.6%, Nicaragua 4.3%, Netherlands 4.2%, Guatemala 4% (2015)

Imports - commodities:

raw materials, consumer goods, capital equipment, petroleum, construction materials

Imports - partners:

US 45.3%, China 9.8%, Mexico 7.1% (2015)

Investment Climate  -  US State Department

Costa Rica, located in Central America, has had a generally favorable investment climate for many years. Foreign direct investment (FDI) is high and has been a significant contributor to Costa Rica’s economic growth. Nevertheless, challenges to the country's competitiveness, including rising operating costs, a complicated legal environment, excessive bureaucratic red tape, and infrastructure deficiencies, are fueling caution on the part of investors.

 

Costa Rica’s continued popularity as an investment destination is well illustrated by historic FDI which climbed steadily from the year 2000 (USD 409 million) to 2008 (over USD 2 billion), reaching a high of over USD 3 billion (6.2 percent of GDP) in 2013 before dropping slightly to USD 2.75 billion in 2014 and 2.85 billion in 2015.

In recent decades the Costa Rican government through its investment promotion agency CINDE has focused on attracting relatively high-tech manufacturers and service companies that demand skilled labor, introduce new technologies and often run robust corporate social responsibility (CSR) programs. CINDE has focused on attracting and retaining investment in specific areas, currently services, advanced manufacturing, life sciences, light manufacturing and the food industry. In addition, the Tourism Institute (ICT) attends to potential investors in the tourism sector.

Despite decades of FDI and trade liberalization, the Costa Rican economy is not as advanced as this investment and export-led development might suggest.

A high and persistent government fiscal deficit threatens to squeeze domestic credit, force intemperate government budget cuts, and impact investor confidence.

 

The legal system, while solid and generally uncorrupt, can be very slow and frustrating for investors.

 

Invasion and occupation of private property by squatters, who are often organized and sometimes violent, does occur in Costa Rica. The Costa Rican police and judicial system have at times failed to deter or to peacefully resolve such invasions.

 

Much of Costa Rica’s basic infrastructure – ports, roads, water systems - needs major upgrading and generally lacks a clear path for financing needed improvements.

 

Public infrastructure concessions in Costa Rica have been contentious in recent years while the government’s fiscal constraints limit public financing as a realistic option. In a significant step forward for port infrastructure, Dutch-based APM Terminals broke ground in early 2015 on its long-delayed USD 1 billion mega port concession on the Caribbean coast. Meanwhile, in the Central Valley a new form of public-private-partnership based on a trust (“fidiecomiso”) structure administered by a bank is currently being tested for the expansion and operation of one major highway.

 

Country Links

Central Bank of Costa Rica

Superintendencia General de Entidades Financieras (SUGEF)

Registro Nacional - República de Costa Rica

Financial Analysis Unit (Costa Rican Institute on Drugs) (UAF-Costa Rica)

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

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