El Salvador

Sanctions

No

FATF AML Deficient List

No

Higher Risk

Suspended from the Egmont Group

US Dept of State Money Laundering Assessment
Not on EU White list equivalent jurisdictions
International Narcotics Control Majors List

Medium Risk

Non - Compliance with FATF 40 + 9 Recommendations
Weakness in Government Legislation to combat Money Laundering
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Failed States Index (Political Issues) (Average Score)

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ANTI-MONEY LAUNDERING

 

FATF Status

El Salvador is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in El Salvador was undertaken by the Financial Action Task Force (FATF) in 2010. According to that Evaluation, El Salvador was deemed Compliant for 11 and Largely Compliant for 12 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 2 of the 6 Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

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

OVERVIEW

 

El Salvador’s main money laundering vulnerability is the FIU’s recent suspension from the Egmont Group in late September 2018 based on the government’s lack of progress in demonstrating the FIU’s operational independence.   

 

Current capacity building efforts are improving El Salvador’s ability to investigate and prosecute complex money laundering schemes, with a major success in the recent conviction of an expresident and several associates for money laundering and embezzlement.

 

 

Egmont Group

On 27 September 2018, the Heads of FIU also decided to suspend UIF El Salvador due to a continuous lack of compliance with Egmont Group principles relating to operational independence and autonomy. UIF El Salvador is now excluded from all Egmont Group events and activities.

 

SANCTIONS

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

 

BRIBERY & CORRUPTION

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           35

World Governance Indicator – Control of Corruption             38

ECONOMY

The smallest country in Central America geographically, El Salvador has the fourth largest economy in the region. With the global recession, real GDP contracted in 2009 and economic growth has since remained low, averaging less than 2% from 2010 to 2014, but recovered somewhat in 2015. Remittances accounted for 17% of GDP in 2014 and were received by about a third of all households.

 

In 2006, El Salvador was the first country to ratify the Dominican Republic-Central American Free Trade Agreement, which has bolstered the export of processed foods, sugar, and ethanol, and supported investment in the apparel sector amid increased Asian competition. In September 2015, El Salvador kicked off a five-year $277 million second compact with the Millennium Challenge Corporation - a US Government agency aimed at stimulating economic growth and reducing poverty - to improve El Salvador's competitiveness and productivity in international markets.

 

The Salvadoran Government maintained fiscal discipline during post-war reconstruction and rebuilding following earthquakes in 2001 and hurricanes in 1998 and 2005, but El Salvador's public debt, estimated at 65% of GDP in 2015, has been growing over the last several years. Total external debt was nearly 60% of GDP in 2015.

 

Agriculture - products:

coffee, sugar, corn, rice, beans, oilseed, cotton, sorghum; beef, dairy products

Industries:

food processing, beverages, petroleum, chemicals, fertilizer, textiles, furniture, light metals

Exports - commodities:

offshore assembly exports, coffee, sugar, textiles and apparel, gold, ethanol, chemicals, electricity, iron and steel manufactures

Exports - partners:

US 47.1%, Honduras 13.9%, Guatemala 13.6%, Nicaragua 6.6%, Costa Rica 4.5% (2015)

Imports - commodities:

raw materials, consumer goods, capital goods, fuels, foodstuffs, petroleum, electricity

Imports - partners:

US 39.4%, Guatemala 9.6%, China 8.1%, Mexico 7.4%, Honduras 5.7% (2015)

Investment Climate  -  US State Department

 

El Salvador is located on the Pacific Coast of Central America. The government of El Salvador (GoES) is eager to attract greater foreign investment and is taking steps to improve its investment climate. In recent years, El Salvador has lagged behind the region in attracting foreign direct investment (FDI). The Salvadoran Central Reserve Bank (“Central Bank”) estimated FDI inflows of $428.7 million in 2015, significantly less compared to the almost $1 billion average to other countries in the region. Political uncertainty, burdensome commercial regulations, a sometimes ineffective judicial system, and widespread violent crime are often cited as elements that impede investment in El Salvador.

In 2011, El Salvador and the United States initiated the Partnership for Growth (PFG), a new cooperative development model, to help improve El Salvador’s economy and investment climate. November 2015 marked the fourth anniversary of the PFG implementation, which has included measures to foster a more favorable environment for business and investment, and improve human capital and infrastructure.

 

On September 9, 2015, El Salvador’s second Millennium Challenge Corporation (MCC) Compact entered into force. With its “More Investment, Less Poverty” theme, the $277 million Compact (plus $88.2 million from El Salvador in counterpart funding) includes projects to improve the investment climate ($42.4 million from MCC, $50 million from El Salvador), logistical infrastructure ($109.6 million from MCC, $15.7 million from El Salvador), and human capital ($100.7 million from MCC, $15 million from El Salvador) over the next five years. Compact projects will follow MCCs guidelines and policies, including those that emphasize the environment, social inclusion and dialogue, gender, fiscal accountability, transparency, and citizen participation.

 

For Fiscal Year 2016, the U.S. Congress has made available up to $750 million for the United States to implement its Strategy for Engagement in Central America in support of the Northern Triangle Countries’ Alliance for Prosperity Plan, and other regional priorities. The goal of the Alliance for Prosperity is an economically-integrated Central America that is more democratic, provides greater economic opportunities to its people and effective public institutions, ensuring the security of its citizens. The success of the Alliance for prosperity will depend greatly on the political will of the Central American governments.

CAFTA-DR, the free trade agreement among Central American countries, the Dominican Republic, and the United States, entered into force for the United States and El Salvador in 2006. El Salvador also has free trade agreements with Mexico, Chile, Panama, Colombia, and Taiwan. El Salvador, jointly with Costa Rica, Guatemala, Honduras, Nicaragua, and Panama, signed an Association Agreement with the European Union that includes the establishment of a Free Trade Area. El Salvador is also negotiating trade agreements with Canada, Peru, Belize, and South Korea.

 

The GoES continues to take measures to improve the business climate. In January 2015, in its five-year planning document (Plan Quinquenal), the government identified 44 geographic areas for prioritized economic development efforts. During the course of the year, the Legislative Assembly passed relevant legislation, e.g., better regulation and oversight of remittances, strengthening penalties against bulk cash smuggling, and increasing financial inclusion by improving access to financial services and “e-money” for individuals and small/medium enterprises. The Assembly also approved an electronic signature law and reformed the country’s fiscal incentive law in order to promote increased investment in renewable energy. The Ministry of Economy took steps to facilitate access to and improve both its physical and online “one-stop window” for investors that facilitate the processing and approval of required permits necessary to set up new businesses. New taxes on telecommunications transactions and income over $500,000, however, have been identified as barriers to new investment by the private sector.

 

 

Country Links

Financial Investigation Unit El Salvador (UIF - El Salvador)
Superintendencia del Sistema Financiero
Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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