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 in 2022. According to that Evaluation, Ecuador was deemed Compliant for 10 and Largely Compliant for 18 of the FATF 40 Recommendations. It was deemed Highly effective for 0 and Substantially Effective for 1 of the Effectiveness & Technical Compliance ratings.

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 transit country for illicit drugs.  A dollarized, cash-based, and large informal economy and Ecuador’s geographic location between two major drug-producing countries make it highly vulnerable to money laundering and narcotrafficking.  Money laundering occurs primarily through trade, commercial activity, and cash couriers.  The government-instituted COVID-19 state of emergency expanded money laundering opportunities.  

Pursuing public corruption, a facilitator for money laundering, is a top priority for President Lasso’s government.  Authorities made progress on efforts to combat money laundering by implementing and training an interagency task force, establishing systems for risk-based analysis, and by successfully prosecuting high-level government officials involved in COVID-

19-related corruption schemes.  While Ecuador has strengthened its anti-money laundering/combating the financing of terrorism (AML/CFT) regime, the government needs to train personnel, allocate sufficient resources, and implement additional reforms to effectively prevent, detect, investigate, and prosecute money laundering.  

Ecuadorian cooperation with U.S. law enforcement accelerated in 2021.  In 2020, the U.S. Drug Enforcement Administration, Department of State, and Ecuador’s Ministry of Government, Attorney General’s Office (AGO), and Financial and Economic Analysis Unit (UAFE),Ecuador’s financial intelligence unit (FIU), signed a memorandum of understanding.   In October 2021, in collaboration with DEA, UAFE created a vetted AML unit, a specialized investigative group that targets money laundering directly related to and derived from narcotics trafficking.  

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           34

World Governance Indicator – Control of Corruption             30

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

The government of Ecuador under President Guillermo Lasso has adopted an ambitious economic reform agenda to drive investment. Following the April 2021 election of one of the region’s most pro-business presidents in decades, private sector leaders in Ecuador emphasized the “Lasso Effect” in investment, given the surge of optimism. “More Ecuador in the world and more of the world in Ecuador” – President Lasso’s key message for his presidency – includes the administration’s drive to attract $30 billion in investment over his four-year administration. With investment facilitation becoming a central pillar of public policy, the Lasso administration launched the “Ecuador Open for Business” initiative in 2021 to promote investment, particularly through public-private partnerships (PPPs). In 2022, the initiative held investment forums in eight countries, including the United States.

The Ecuadorian government has taken positive steps to improving fiscal stability. The government successfully completed its $6.5 billion, 27-month Extended Fund Facility with the International Monetary Fund in January 2023. The Ecuadorian Central Bank reported a 2.9 percent GDP growth in 2022 and projects the economy will grow 2.6 percent in 2023. Ecuador’s inflation clocked in around 3.7 percent in 2022, the lowest value in Latin America. The Ecuadorian government remains committed to the sustainability of public finances and to continue a fiscal consolidation path. The fiscal deficit narrowed to 1.7 percent of GDP in 2022, the lowest since 2013, due to improved tax collection, prudent public spending, and high oil prices.

Still, foreign direct investment (FDI) flows remain lackluster as political instability threatens the investment outlook. Lasso’s opposition, which has a majority in the Ecuadorian National Assembly, frustrated the administration’s attempts to pass investment and other economic reforms. Violent protests in June 2022 resulted in an impeachment attempt against President Lasso and a loss of over $1 billion for the economy. To end the protests, the Lasso administration made major concessions that complicated investment in the extractives industries, including a 12-month moratorium on additional oil and mining concessions. The National Assembly initiated new impeachment proceedings against President Lasso in March, kicking off a one-to-two-month legislative process to reach an impeachment vote. The impeachment proceedings resulted in Ecuador’s country risk climbing to nearly 2,000 points, constricting access to capital.

Ecuador remains a challenging investment climate despite the current administration’s attempts to attract investors. Serious budget deficits and the COVID pandemic forced the government to employ cost-cutting measures and limit public investment. Ecuador has traditionally struggled to structure tenders and public-private partnerships that are bankable, transparent, and competitive. This has discouraged private investment and attracted companies that lack a commitment to quality construction, accountability and transparency, environmental sustainability, and social inclusion. Corruption remains widespread, and Ecuador is ranked in the bottom half of countries surveyed for Transparency International’s Perceptions of Corruption Index. In addition, economic, commercial, and investment policies are subject to frequent changes and can increase the risks and costs of doing business in Ecuador.

Russia’s war of aggression against Ukraine resulted in a short-term shock to the Ecuadorian economy, given Russia was a major export market and Ecuador imported key products such as fertilizer and sunflower oil from the region. Ecuador identified alternative markets for its exports and alternative suppliers for Russian imports. Still, supply chain disruptions and worldwide price increases for certain products like fertilizer negatively impacted the economy. While inflation was a modest 3.7 percent in 2022, sharp increases in the price of transportation and the basic food basket are major concerns for poor and middle-class households.

Ecuador is a dollarized economy that has few limits on foreign investment or repatriation of profits, with the exception of a currency exit tax. It has a population that generally views the United States positively, and the Lasso administration has expanded bilateral ties and significantly increased cooperation with the United States on a broad range of economic, security, political, and cultural issues.

Country Links

Unidad de Análisis Financiero (UAF)

Superintendencia de Compañías

Central Bank of Ecuador