Ecuador

Sanctions

No

FATF AML Deficient List

No longer on FATF AML Deficiency List

Higher Risk

US Dept of State Money Laundering Assessment
Non - Compliance with FATF 40 + 9 Recommendations
Not on EU White list equivalent jurisdictions
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Failed States Index (Political Issues)(Average Score)
International Narcotics Control Majors List

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ANTI-MONEY LAUNDERING

 

FATF Status

Ecuador is on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Latest FATF Statement  -  23 October 2015

The FATF welcomes Ecuador’s significant progress in improving its AML/CFT regime and notes that Ecuador has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2010. Ecuador is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Ecuador will work with GAFILAT as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Ecuador was undertaken by the Financial Action Task Force (FATF) in 2011. According to that Evaluation, Ecuador was deemed Compliant for 1 and Largely Compliant for 13 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 5 of the 6 Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

Ecuador is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes

OVERVIEW

 

Ecuador is a major drug transit country.  A U.S. dollar-based economy and geographic location between two major drug-producing countries make Ecuador highly vulnerable to money laundering.  Economic informality and a prevalence of cash transactions also complicate AML efforts.  Approximately 55 percent of people do not have bank accounts, and 60 percent of small businesses do not have tax identification numbers or bank accounts.  Money laundering occurs through trade, commercial activity, and cash couriers.  The transit of illicit cash is a significant activity, and bulk cash smuggling and structuring are common problems. 

 

Bureaucratic stove-piping, corruption, lax immigration laws, and lack of international information sharing and specialized AML expertise in the judiciary, law enforcement, and banking regulatory agencies hamper efforts to improve AML enforcement and prosecutions.  

 

Rooting out public corruption remains a top priority for the current government.  The government has investigated and prosecuted high-level government officials from the previous administration for bribery, embezzlement, illicit enrichment, and organized crime.  The Attorney General’s Office (AGO) continues to investigate allegations of financial crimes related to state oil company PetroEcuador and the Brazilian construction company Odebrecht.

 

 

SANCTIONS

There are no international sanctions currently in force against this country.

 

BRIBERY & CORRUPTION

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           34

World Governance Indicator – Control of Corruption             31

Corruption is a major obstacle for businesses investing or planning to invest in Ecuador. Several sectors (such as public services and public procurement) suffer from endemic corruption, and bribery and facilitation payments are widespread. Ecuador's anti-corruption legal framework covers various corruption offences; gifts and hospitality offered with the intention to gain an undue advantage are illegal. However, these laws are poorly enforced, and government officials engage in corruption with impunity. For further information - GAN Integrity Business Anti-Corruption Portal

 

ECONOMY

Ecuador is substantially dependent on its petroleum resources, which have accounted for more than half of the country's export earnings and approximately 25% of public sector revenues in recent years.

 

In 1999/2000, Ecuador's economy suffered from a banking crisis, with GDP contracting by 5.3% and poverty increasing significantly. In March 2000, the Congress approved a series of structural reforms that also provided for the adoption of the US dollar as legal tender. Dollarization stabilized the economy, and positive growth returned in the years that followed, helped by high oil prices, remittances, and increased non-traditional exports. The economy grew an average of 4.3% per year from 2002 to 2006, the highest five-year average in 25 years. After moderate growth in 2007, the economy reached a growth rate of 6.4% in 2008, buoyed by high global petroleum prices and increased public sector investment. President Rafael CORREA Delgado, who took office in January 2007, defaulted in December 2008 on Ecuador's sovereign debt, which, with a total face value of approximately US$3.2 billion, represented about 30% of Ecuador's public external debt. In May 2009, Ecuador bought back 91% of its "defaulted" bonds via an international reverse auction.

 

Economic policies under the CORREA administration - for example, an announcement in late 2009 of its intention to terminate 13 bilateral investment treaties, including one with the US - have generated economic uncertainty and discouraged private investment. China has become Ecuador's largest foreign lender since Quito defaulted in 2008, allowing the government to maintain a high rate of social spending; Ecuador contracted with the Chinese government for more than $9.9 billion in forward oil sales, project financing, and budget support loans as of December 2013.

 

The level of foreign investment in Ecuador continues to be one of the lowest in the region as a result of an unstable regulatory environment, weak rule of law, and the crowding-out effect of public investments. Faced with a 2013 trade deficit of $1.1 billion, Ecuador erected technical barriers to trade in December 2013, causing tensions with its largest trading partners. Ecuador also decriminalised intellectual property rights violations in February 2014. In March, 2015 Ecuador imposed tariff surcharges for 15 months from 5% to 45% on an estimated 32% of imports. In 2014, oil output increased slightly and production remained steady in 2015. In 2015, however, lower oil prices forced CORREA to cut the budget twice, and the government has considered further budget and subsidy cuts for 2016.

 

Agriculture - products:

Bananas, coffee, cocoa, rice, potatoes, cassava (manioc, tapioca), plantains, sugarcane; cattle, sheep, pigs, beef, pork, dairy products; fish, shrimp; balsa wood

Industries:

Petroleum, food processing, textiles, wood products, chemicals

Exports - commodities:

petroleum, bananas, cut flowers, shrimp, cacao, coffee, wood, fish

Exports - partners:

US 39.5%, Chile 6.2%, Peru 5.1%, Vietnam 4.3%, Colombia 4.3% (2015)

Imports - commodities:

industrial materials, fuels and lubricants, nondurable consumer goods

Imports - partners:

US 27.1%, China 15.3%, Colombia 8.3%, Panama 4.9% (2015)

Investment Climate  -  US State Department

 

Ecuador is a country straddling the equator on South America’s west coast between Colombia and Peru. From 2006 to 2014 the Ecuadorian economy grew an average of over four percent per year. Growth decreased to 0.3 percent in 2015 due in part to the drop in the price of petroleum and the appreciating dollar, which Ecuador uses as its national currency. Ecuador is relatively open to foreign investment in most sectors; however, foreign direct investment (FDI) inflows are very low in comparison to other Latin American countries. The government has taken some steps recently to attract investment including passing a public-private partnership law, changing tax and regulatory policies for mining, and signing investment contracts with multinational petroleum companies. Ecuador also agreed on terms of payment of an international arbitration award to a U.S. petroleum company and, in December 2015, repaid a global bond on time for the first time in its history.

 

Economic, commercial, and investment policies are sometimes contradictory and are subject to frequent changes. The legal uncertainty resulting from frequent policy changes increases the risks and costs of doing business. Systemic weaknesses in the judicial system and its susceptibility to political or economic pressures are issues for U.S. companies investing in or trading with Ecuador. The existing U.S.-Ecuador Bilateral Investment Treaty (BIT) provides guarantees for national treatment; unrestricted remittances and transfers; prompt, adequate, and effective compensation for expropriation; and the resolution of investment disputes through international arbitration.

 

In April 2016, Ecuador partially extended tariff surcharges it introduced in March 2015. The surcharges of 15, 25, and 40 percent apply to roughly 2,200 products and phase-out was extended from June 2016 to June 2017.

 

Foreign investors may remit 100 percent of net profits and capital, subject to a capital exit tax currently set at five percent. Ecuadorian law requires private companies to distribute 15 percent of pre-tax profits to employees each year.

In April 2016, the United States Trade Representative moved Ecuador from Priority Watch List to Watch List to in its annual Special 301 Report on intellectual property. This decision was in recognition of Ecuador’s passage of an amendment reinstating criminal procedures and penalties for intellectual property violations.

Country Links
Unidad de Análisis Financiero (UAF)
Superintendencia de Compañías
Central Bank of Ecuador
Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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