Nicaragua Country Summary

FATF Status

Nicaragua is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations

The latest follow-up to the Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Nicaragua was undertaken in 2021. According to that Evaluation, Nicaragua was deemed Compliant for 7 and Largely Compliant for 30 of the FATF 40 Recommendations. It was deemed Highly effective for 0 and Substantially Effective for 1 of the Effectiveness & Technical Compliance ratings.

Nicaragua is grappling with pervasive corruption and organized crime, exacerbated by a lack of effective governance and strong institutions. The Ortega-Murillo regime's control over government functions has led to rampant corruption, particularly in public procurement and licensing, while the judicial system remains vulnerable to political influence and bribery, undermining the rule of law.

The country also faces significant challenges from various criminal markets, including human trafficking, arms trafficking, and drug smuggling, with its porous borders facilitating these illicit activities. Despite the presence of some robust compliance measures in the banking sector, the overall environment is characterized by high levels of corruption, impunity, and a deteriorating civil society, which struggles against government repression and restrictions on press freedom.

Nicaragua's economy and investment climate are characterized by significant instability and high risks for investors, particularly following the ratification of a constitutional rewrite that undermines judicial independence and the rule of law. The government has engaged in widespread repression, including the unjust detention of political prisoners, expropriation of private property, and the dismantling of civil society organizations, leading to a business environment marked by arbitrary regulations and a lack of transparency. Despite these challenges, Nicaragua maintains stable macroeconomic fundamentals, such as high foreign reserves and a well-capitalized banking sector, but the overall investment landscape remains precarious, with a preference for partnerships with Chinese state-owned enterprises and a notable decline in traditional foreign direct investment since the political crisis of 2018.