FATF Status

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

Compliance with FATF Recommendations

Eritrea 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)

Eritrea was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -

Eritrea is not a regional financial center. Historically, the Government of the State of Eritrea has relied on command economic policies and arrangements. Although reliable statistics are unavailable, exports, with the exception of the mining industry, are small and generate little hard currency. The development of the mining sector and successful mining ventures, operated in partnership with large international mining companies, have led to an increased inflow of capital as earnings accrue from mineral exports, notably of gold and copper. However, lower commodity prices are likely to drag down export and fiscal revenues. The government relies in part on taxation of Eritreans living overseas to sustain itself. Many in the Eritrean domestic population are similarly dependent on remittances from relatives abroad.

Eritrea is a source country for men, women, and children subjected to forced labor in the National Service and, to a lesser extent, sex trafficking. The level of cross-border trafficking of narcotics is not known, but Eritrea is not believed to be a significant market or transit route for narcotics. There are, however, reports that Eritrean government and military officials profit from contraband and human smuggling and extortion.

Due to its informal, cash-based economy; limited regulatory structure; underground remittances; prevalent use of money or value transfer services, such as hawala; proximity to regions where terrorist and criminal organizations operate; and increasing corruption, Eritrea is vulnerable to money laundering and related activities. The non-convertibility of the nakfa currency in international markets helps drive the use of underground remittance systems.  All banks in Eritrea are government controlled.

Some sources continue to charge that elements of the Eritrean security apparatus provide training, supplies, and financing to destabilizing forces in the region. Evidence of the government’s past support to insurgents in neighboring states resulted in the UNSC levying an arms embargo against Eritrea beginning in 2009. In December 2011, the UNSC toughened existing sanctions, also addressing concerns over the potential use of Eritrean mining revenues to support destabilizing activities. In 2015, the UN Somalia-Eritrea Monitoring Group (SEMG) reported it found no evidence of continued Eritrean support to al-Shabaab during the course of its present mandate.

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           21

World Governance Indicator – Control of Corruption              8

Eritrea’s investment climate is not conducive to U.S. investment. U.S. economic sanctions, the lack of a commercial code, disconnection from international financial systems for all but government-to-government transactions, and strict government control of all imports and exports severely limit foreign investment.  Most private businesses are small, family-owned storefronts. With rare exception, businesses of size or scale are state controlled or run by the sole political party, the Peoples Front for Democracy and Justice (PFDJ).  The Government of the State of Eritrea (GSE) is the largest employer in the country, and most citizens are employed by the country’s national service program, which often results in indefinite terms of forced labor at very low wages in a wide range of public sector positions.  The national currency, the Eritrean Nakfa, is not convertible and there are restrictions on the repatriation of profits out of the country.  The national budget is not public.  The judiciary is not independent or transparent.  There is no freedom of the press, international journalists are often barred from entry, and the government maintains control of the media.  Most profitable investments in Eritrea come about through direct negotiation with the PFDJ rather than market-based private investment. Eritrea imports over 70% of its wheat from the Russian Federation and Ukraine region. Russia’s war of aggression against Ukraine has not impacted inflation or food security supply chains.

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