Djibouti Country Summary
Sanctions
No
FATF AML Deficient List
No but Mutual Evaluation not yet undertaken
Terrorism
Corruption
US State ML Assessment
Criminal Markets (GI Index)
EU Tax Blacklist
Offshore Finance Center
Background Information
Anti Money Laundering
FATF Status
Djibouti is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
Djibouti has not yet undertaken a Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards.
US Department of State Money Laundering assessment (INCSR)
Djibouti was deemed a Jurisdiction of Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
Djibouti is one of the most stable countries in the Horn of Africa. Djibouti’s GDP continues to grow by over 6 percent a year due to a surge in foreign investment in the port, construction, and tourism sectors, primarily from the countries of the Gulf Cooperation Council and China.
Djibouti aspires to be a regional financial hub, touting its U.S. dollar-pegged currency and lack of foreign exchange controls as key characteristics of the monetary system.
Djibouti hosts no offshore banks, although its banking laws explicitly permit offshore institutions. Hawala and other money/value transfer services are prevalent in the region, and informal markets for goods are sometimes used for counter-valuation.
Smuggled goods consist primarily of highly-taxed cigarettes and alcohol. A khat import quota instituted in 2014 has resulted in increased khat smuggling. Djibouti’s cultural and historical trading ties with neighboring Somalia present a risk factor. Many Djibouti-based financial institutions have operations in Somalia, a jurisdiction which has no AML/CFT legislation or other controls. There are also allegations of Djibouti-based financial facilitation on behalf of the Somali terrorist group al-Shabaab.
There are currently two free zones administered by the Djibouti Ports and Free Zone Authority (DPFZA). The chief executive officer of DPFZA reports directly to the Office of the President. One free zone is located at the “old” port. The other, Djibouti Free Zone (DFZ), is located on 40 hectares and offers office space, warehouses, light industrial units, and hangars. Jebel Ali Free Zone, based in Dubai, manages the commercial and operational aspects of the DFZ. The purpose of both free zones is to promote foreign investment in Djibouti with the goal of making Djibouti the gateway to regional and East African markets. There are plans to build two additional free zones in the coming years.
Sanctions
There are no international sanctions currently in force against this country.
The Arab League (comprising 22 Arab member states), of which this country is a member, has approved imposing sanctions on Syria. These include: -
- Cutting off transactions with the Syrian central bank
- Halting funding by Arab governments for projects in Syria
- A ban on senior Syrian officials travelling to other Arab countries
- A freeze on assets related to President Bashar al-Assad's government
The declaration also calls on Arab central banks to monitor transfers to Syria, with the exception of remittances from Syrians abroad.
The Arab League has also boycotted Israel in a systematic effort to isolate Israel economically in support of the Palestinians, however, the implementation of the boycott has varied over time among member states. There are three tiers to the boycott. The primary boycott prohibits the importation of Israeli-origin goods and services into boycotting countries. The secondary boycott prohibits individuals, as well as private and public sector firms and organizations, in member countries from engaging in business with any entity that does business in Israel. The Arab League maintains a blacklist of such firms. The tertiary boycott prohibits any entity in a member country from doing business with a company or individual that has business dealings with U.S. or other firms on the Arab League blacklist.
Bribery & Corruption
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 30
World Governance Indicator – Control of Corruption 24
Economy
Djibouti, a country with few resources, recognizes the crucial need for foreign direct investment (FDI) to stimulate economic development, especially as the country recovers from two years of exogenous shocks to its economy, such as global shipping disruption due to the pandemic and regional conflicts. The country’s assets include a strategic geographic location, free zones, an open trade regime, and a stable currency. Djibouti has identified a number of priority sectors for investment, including transport and logistics, real estate, energy, agriculture, and tourism.
Since 2020, the government has instituted several initiatives aimed at improving competitiveness both regionally and internationally. These reforms included starting online registration for companies and the creation of the Djibouti Port Community System platform, which provide a comprehensive set of online services to the business community. The EU also funded a revision to the investment code in 2022 intended to rationalize investment incentives and improve transparency. This revision and implementation are ongoing.
Economic development and foreign investment are hindered by high electricity costs, high unemployment, an unskilled workforce, a large informal sector, regional instability, opaque business practices, compliance risks, corruption, and a weak financial sector.
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