Risk Indicators
- FATF/EU Blacklist/Greylist (Lower Concern)
- Terrorism Financing (Lower Concern)
- US Dept of State INCSR
- Proliferation Financing
- Corruption
- Criminality
- Resilience & Governance
- Financial Transparency
- Offshore Finance Centres
- Sanctions
Background
Honduras, independent since 1821, moved from prolonged military rule to elected civilian government in 1982 and later endured the devastating effects of Hurricane Mitch. Its regional role was shaped by Cold War conflicts, while economic recovery has continued despite the effects of COVID-19 and severe storms in 2020 and 2021. The country’s three land-border neighbors—Guatemala, El Salvador, and Nicaragua—present a complex surrounding environment of political, security, and governance concerns.
Across the region, challenges include threats to democratic institutions, violence, repression, weakened rule of law, and restrictions on civic space. European Union measures affecting actors in Guatemala and Nicaragua, alongside United States sanctions connected to El Salvador, reflect the international response to alleged abuses and democratic erosion. Opaque governance, institutional weakness, and the possibility of sanctions circumvention add further uncertainty to Honduras’s regional security setting.
AML & Terrorist Financing
Honduras has strengthened its AML/CFT framework and is no longer subject to FATF monitoring, with the 2020 follow-up recognizing improved compliance while continued enhanced follow-up through GAFILAT remains relevant. Money laundering risks remain closely tied to drug trafficking, extortion, human trafficking, migrant smuggling, corruption, and cross-border cash movement, with vulnerabilities particularly evident among DNFBPs, legal entities, and sectors lacking effective supervision. Although the CNBS, UIF, and CIPLAFT provide an institutional foundation, unresolved concerns include beneficial ownership transparency, terrorism-financing guidance, virtual-asset regulation, interagency information sharing, and limited investigative and judicial capacity.
Sanctions
Honduras is obligated to implement United Nations Security Council measures, including restrictions reflected on the Consolidated List, but no independent Honduran sanctions regime against other nations is identified. Its enforcement record has drawn scrutiny through UNSC panel reports documenting alleged North Korea-linked evasion networks using Honduran vessels, ports, financial channels, and opaque asset ownership structures. Although no international sanctions are currently described as formally in force against Honduras, the United States and other countries have reportedly applied targeted measures or criticism connected to corruption, organized crime, and sanctions facilitation.
Criminality
Honduras faces entrenched public-sector and judicial corruption, particularly in procurement, permits, customs, land-title transfers, and financial administration, while organized criminal activity includes trafficking in people, drugs, arms, illicit natural resources, and widespread extortion. Although the Castro administration continues negotiations with the United Nations over the CICIH and Honduras is party to the UNCAC and OAS anti-corruption convention, criminal networks and state-embedded actors remain linked to money laundering, political corruption, cybercrime, and territorial control.
Reports
Honduras recorded a sharp rise in maritime cocaine interdictions in 2024, including more than 19 metric tons seized by the Honduran Navy, while coca eradication, coordination gaps, equipment shortages, corruption, and the reach of groups such as MS-13, 18th Street, and foreign cartels continue to complicate efforts led by the HNP, DNPA, and U.S.-supported SIU. The country remained on Tier 2 for trafficking concerns as authorities increased prosecutions and developed localized victim-assistance protocols, yet limited investigative capacity, inadequate services outside urban areas, and exploitation of children, migrants, Indigenous and Afro-descendant communities, and other vulnerable groups remain prominent concerns.
Industry/Product Sector Risk
Honduras presents a diverse but uneven risk landscape, with the CNBS-supervised banking, remittance, currency exchange, insurance, and securities sectors operating alongside DNFBPs and cash-intensive industries exposed to organized crime, corruption, and cross-border illicit flows. Particularly notable vulnerabilities arise in real estate, transportation, hospitality, gaming, public works, legal services, and corporate structures, where weak beneficial ownership transparency, extensive cash use, and developing supervision can obscure the movement of criminal proceeds. The interplay between drug transit routes, extortion, public-sector scandals such as the Honduran Institute of Social Security case, and gaps in oversight creates a complex environment that merits closer examination across both financial and commercial channels.
Economy & Investment Climate
Honduras combines strategic access to U.S. markets through CAFTA-DR, natural resources, a deep-water port, a substantial manufacturing and agricultural base, and remittances exceeding one-quarter of GDP, with recent signs of macroeconomic support from the IMF and sovereign bond markets. Yet businesses continue to navigate policy uncertainty, foreign-exchange constraints, infrastructure and electricity weaknesses, land disputes, security concerns, and overlapping regulatory processes involving institutions such as the National Investment Council, SAR, and ENEE.
Cryptocurrency Regulations
Honduras maintains a cautious and largely unstructured approach to cryptocurrency, with the National Banking and Securities Commission (CNBS) prohibiting financial institutions from trading digital assets in February 2024 amid concerns over fraud, money laundering, and terrorist financing. With no compliance registry for VASPs, defined tax treatment, token or ICO framework, or explicit Travel Rule application, cryptocurrency remains outside legal-tender protections and in a challenging regulatory gray area.
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