Risk Indicators
- FATF/EU Blacklist/Greylist (Lower Concern)
- Terrorism Financing (Medium Concern)
- US Dept of State INCSR
- Proliferation Financing
- Corruption
- Criminality
- Resilience & Governance
- Financial Transparency
- Offshore Finance Centres
- Sanctions
Background
Madagascar’s history reflects successive waves of settlement, maritime commerce, regional power, colonial rule, and contested democratic transition, from the Merina Kingdom and French conquest to independence in 1960. Its modern political landscape has been shaped by disputed elections, military intervention, mediation, and recurring competition among figures including Didier RATSIRAKA, Marc RAVALOMANANA, Hery RAJAONARIMAMPIANINA, and Andry RAJOELINA. The 2023 election, marked by an opposition boycott and allegations of rigging, was nevertheless accepted internationally after observers found no evidence of systemic fraud.
The island’s regional setting adds further complexity, with nearby Mozambique facing an ISIS-linked insurgency in Cabo Delgado and a displacement crisis affecting more than one million people. Comoros remains associated with authoritarian rule, election boycotts, and a passport-sales scandal involving corruption, money laundering, and alleged sanctions evasion, while Mayotte faces unrest tied to migration and pressure on public services. Mauritius provides a contrasting model of relative stability, enforcing United Nations sanctions related to terrorism and weapons proliferation as surrounding states confront significant political, security, and financial challenges.
AML & Terrorist Financing
Madagascar is not currently listed by FATF for strategic deficiencies, yet its 2024 follow-up findings leave it in enhanced follow-up, with uneven progress across the 40 Recommendations and no effectiveness area rated highly or substantially effective. Significant exposure remains associated with corruption, tax and customs offenses, trafficking in natural resources, drug trafficking, informality, and limited institutional capacity, even as SAMIFIN continues to receive and analyze suspicious transaction reports. Terrorist-financing controls remain particularly underdeveloped, with limited investigations, no recorded convictions, gaps in targeted financial sanctions and nonprofit-sector oversight, and an absence of a formal proliferation-financing sanctions framework.
Sanctions
Madagascar is required to implement applicable UN Security Council measures, including restrictions involving designated individuals and entities, but no sanctions are currently in force against Madagascar itself. The country has faced scrutiny for allowing business arrangements linked to sanctioned North Korean entities, while Colas Madagascar S.A. was debarred by the World Bank over alleged collusive and fraudulent practices connected to the Airports Madagascar Project. No separate Madagascar-imposed sanctions on other nations are identified, though the cited concerns point to regulatory gaps involving prohibited partnerships and opaque financial dealings.
Criminality
Madagascar has established bodies including CSI, BIANCO, PAC, ARAI, and SAMIFIN, yet corruption remains entrenched in public procurement, licensing, customs, taxation, and regulatory processes, with investigations involving powerful officials often constrained by limited resources, immunity concerns, and pressure on civic actors such as TI-MG. Criminal activity spans human trafficking, cattle-rustling, illicit timber and wildlife trade, illegal mining, drug transit, counterfeit goods, customs and procurement fraud, and money laundering, with state-linked figures, domestic networks, and foreign actors implicated in some markets.
Reports
Madagascar has stepped up anti-trafficking efforts, including its first convictions in four years, expanded prosecutions and victim referrals, a new subnational anti-trafficking body, and measures tied to the NAP and recruitment-fee law, prompting an upgrade to Tier 2 despite persistent gaps. Children and adults remain vulnerable to exploitation in domestic work, mining, fishing, commercial sex, online abuse, and migration routes, while limited services outside Antananarivo, misclassification of crimes, corruption, and alleged official complicity continue to complicate progress.
Industry/Product Sector Risk
Madagascar’s industry landscape is shaped by a largely cash-based economy, significant informality, and exposure to illicit proceeds connected to corruption, tax and customs fraud, and trafficking in rosewood, minerals, precious stones, and wildlife. High-risk areas include mining, forestry, real estate, trade finance, transportation, telecommunications, casinos, and public works, while rapidly expanding mobile-money channels add a distinct layer of monitoring and customer-identification challenges. Although foreign banking groups and the CSBF provide stronger controls in parts of the formal financial system, limited beneficial-ownership transparency and uneven supervision—particularly across DNFBPs—leave important questions around how value moves through Madagascar’s commercial and natural-resource sectors.
Economy & Investment Climate
Madagascar combines a young workforce, substantial natural resources, and promising opportunities in textiles, mining, energy, telecommunications, and export-oriented industries, supported by AGOA access and expanding regional trade links. Yet investors must weigh these prospects against foreign-exchange pressures, infrastructure and skills gaps, corruption, uneven enforcement, and approval delays involving the Economic Development Board of Madagascar and senior authorities.
Cryptocurrency Regulations
Madagascar’s cryptocurrency landscape remains largely undefined, with the Banky Foiben’i Madagasikara (BFM) warning of risks while virtual assets remain neither legal tender nor formally regulated. Against the backdrop of ESAAMLG engagement and a non-compliant FATF assessment, questions surrounding exchanges, VASPs, token offerings, transaction monitoring, and the treatment of gains—including a stated 20% capital-gains rate—remain especially significant.
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