Risk Indicators
- FATF/EU Blacklist/Greylist (Higher Concern)
- Terrorism Financing (Medium Concern)
- US Dept of State INCSR
- Proliferation Financing
- Corruption
- Criminality
- Resilience & Governance
- Financial Transparency
- Offshore Finance Centres
- Sanctions
Background
Yemen’s modern history has been shaped by the legacies of separate northern and southern states, their eventual unification in 1990, and recurring disputes over political representation and regional autonomy. Tensions involving the Houthis, the southern secessionist movement, and shifting national institutions intensified after the 2011 transition associated with the GCC Initiative and the National Dialogue Conference. The subsequent collapse of political arrangements drew in Saudi Arabia, the United Nations, and competing Yemeni factions, producing a conflict whose formal truces have not resolved its underlying divisions.
Yemen’s instability also reflects a wider regional environment involving proxy relationships, maritime insecurity, sanctions evasion, and economic spillover. Saudi Arabia, Oman, the UAE, Iran, and Somalia each intersect with Yemen’s security landscape through mediation, coalition warfare, support for local actors, alleged arms movements, or militant and smuggling networks. Developments involving the Southern Transitional Council, Al-Shabaab, Houthi attacks, and interdictions of military components point to a crisis extending well beyond Yemen’s borders.
AML & Terrorist Financing
Yemen remains subject to strategic AML/CFT concerns, despite FATF-recognized progress in criminalization, asset-freezing procedures, customer due diligence, reporting, and institutional development, with an on-site review still constrained by the security situation. The Central Bank of Yemen and its Financial Information Unit sit at the center of oversight, but conflict, fragmented authority, limited resources, uneven supervision, and reliance on informal hawala networks have complicated effective implementation and enforcement. Exposure linked to smuggling and terrorist financing, low or uneven reporting from covered sectors, and the absence of a centralized public beneficial ownership register leave important questions around transparency, intelligence, and practical capability.
Sanctions
Yemen is not described as maintaining a broad autonomous sanctions regime against other nations, although UN obligations and the Arab League’s historical Israel boycott apply within its framework. International measures directed at Yemen primarily target Ansarallah—the Houthi movement—rather than the Yemeni state, with UN Resolutions 2140, 2216, and 2758 underpinning targeted arms restrictions, asset freezes, and travel bans. The United States, through OFAC and authorities including Executive Orders 13611 and 13224, has added extensive financial and shipping-related designations, while the EU, UK, Canada, Australia, Japan, New Zealand, and Switzerland enforce related restrictions, with recent attention focused on the International Bank of Yemen, cryptocurrency networks, and maritime facilitators.
Criminality
Yemen faces extensive criminal activity across human trafficking, arms and drug transit, counterfeit goods, wildlife trafficking, cyber operations, and financial crimes involving fraud, tax evasion, and alleged diversion of public and humanitarian funds. These activities are facilitated by conflict, porous borders, competing authorities, and the involvement of state-embedded actors, armed factions, tribes, and cross-border criminal networks, with the alleged Yemen Cyber Army adding a disputed cyber dimension.
Reports
Yemen remains a prolonged “Special Case,” where conflict, fragmented control, and a collapsing infrastructure leave migrants from the Horn of Africa, children, and returning Yemeni workers vulnerable to forced labor, sexual exploitation, forced marriage, abduction, and recruitment. Alongside the U.S. State Department’s concerns, activity by the Houthis, AQAP, and ISIS-Yemen continues to shape the country’s security landscape, while the Republic of Yemen Government, Presidential Leadership Council, and Counterterrorism Service face severe capacity and access constraints.
Economy & Investment Climate
Yemen’s low-income economy remains shaped by conflict, dependence on oil and gas, constrained agriculture, and a services sector operating amid severe humanitarian and infrastructure pressures. Remittances provide an important economic lifeline, while the depreciating Yemeni rial, reliance on imported staples, and strategic trade links with Gulf and Asian partners point to both deep vulnerabilities and limited opportunities tied to natural resources and eventual stabilization.
Cryptocurrency Regulations
Yemen’s cryptocurrency landscape remains largely undefined, with the Central Bank of Yemen’s June 26, 2024 circular indirectly restricting crypto-related activity while no VASPs are licensed or registered. With no dedicated rules for exchanges, token offerings, taxation, or the Travel Rule—and continuing FATF concerns over AML/CFT deficiencies—the country presents a complex environment shaped more by regulatory gaps than formal authorization.
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