FATF AML Deficiency List
Non - Compliance with FATF 40 + 9 Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Weakness in Government Legislation to combat Money Laundering
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.
All UN and EU sanctions in place were repealed in November/December 2018
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 21
World Governance Indicator – Control of Corruption 7
Since formal independence from Ethiopia in 1993, Eritrea has faced many economic problems, including lack of financial resources and chronic drought, which have been exacerbated by restrictive economic policies. Eritrea has a command economy under the control of the sole political party, the People's Front for Democracy and Justice. Like the economies of many African nations, a large share of the population - nearly 80% in Eritrea - is engaged in subsistence agriculture, but the sector only produces a small share of the country's total output.
Since the conclusion of the Ethiopia-Eritrea war in 2000, the government has expanded use of military and party-owned businesses to complete President ISAIAS's development agenda. The government has strictly controlled the use of foreign currency by limiting access and availability; new regulations in 2013 aimed at relaxing currency controls have had little economic effect. Few large private enterprises exist in Eritrea and most operate in conjunction with government partners, including a number of large international mining ventures, which began production in 2013. In late 2015, the government of Eritrea introduced a new currency, retaining the name nakfa, and restricted the amount of hard currency individuals could withdraw from banks per month. The changeover has resulted in exchange fluctuations and the scarcity of hard currency available in the market.
While reliable statistics on food security are difficult to obtain, erratic rainfall and the percentage of the labour force tied up in national service continue to interfere with agricultural production and economic development. Eritrea's harvests generally cannot meet the food needs of the country without supplemental grain purchases. Copper, potash, and gold production are likely to drive economic growth and government revenue over the next few years, but military spending will continue to compete with development and investment plans. Eritrea's economic future will depend on market reform, international sanctions, global food prices, and success at addressing social problems such as refugee emigration.
Agriculture - products:
sorghum, lentils, vegetables, corn, cotton, tobacco, sisal; livestock, goats; fish
food processing, beverages, clothing and textiles, light manufacturing, salt, cement
Exports - commodities:
gold and other minerals, livestock, sorghum, textiles, food, small industry manufactures
Imports - commodities:
machinery, petroleum products, food, manufactured goods
Investment Climate - US State Department
The investment climate in Eritrea is not conducive to foreign investment.
While there are opportunities, especially in the extractive industries sector, the Government of the State of Eritrea (GSE) maintains a command economy, with government activities predominating over private enterprise. Unreliable power, complicated and changing import regulations, limited air and ground transportation links, insufficient port facilities, lack of fuel, unrealistic exchange rates, restrictions on repatriation of profits, the near impossibility of getting a construction permit unless the project is government-sanctioned, and in-country travel restrictions all work to undermine trade and investment. In addition, the potential U.S. investor must be aware of the international sanctions regime placed on Eritrea. As a result, there is very little U.S. direct investment. There is no American Chamber of Commerce and few American companies are working in Eritrea.
According to its Five Year Indicative Development Plan 2014-2018, the GSE states that it wants to encourage Foreign Direct Investment, but its policies belie those pronouncements. The GSE began encouraging some types of international investment in 2012, and some reforms were introduced in 2013, ending, as a matter of doctrine, years of adherence to self-imposed isolation and strict self-reliance. However, at the end of 2015, the government recalled all old currency and issued new currency, creating a severe problem in liquidity as there was a severely restricted and insufficient supply of money. The unofficial exchange rate rose from 55 Nakfa/$1 to near parity with the official rate of 15 Nakfa to $1. A series of broader reforms that would ease restrictions on business licensing and imports, described as ready for enactment several times as far back as 2013, have never been approved by the President. Recently, more flights in and out of Asmara have been added to replace Lufthansa flights that terminated in 2013. Eritrea achieved Millennium Development Goals related to public health in the course of 2014, and is making progress toward other MDGs.
Eritrea’s labor pool is well qualified compared with those in neighboring states. Eritreans start English classes in elementary school and are educated almost exclusively in English from grade six onwards. The people are generally resourceful and industrious. Historically, corruption in Eritrea appears less pervasive that in other countries in the region, but there are signs that corruption is on the rise, particularly in the areas of smuggling and immigration. The country’s mandatory national service program and possibility of the GSE to place persons performing national service in some commercial enterprises, may leave businesses open to charges of relying on conscripts as a labor force.
Investment opportunities in Eritrea are most promising in the mining, minerals, energy and agricultural sectors. Foreign activity in financial services, domestic wholesale trade, domestic retail trade, and commission agencies is prohibited. The GSE prefers to obtain a controlling interest in any large ventures.
The country performs poorly with regard to public finance management. It has never published a national budget. Economic indicators are based on conjecture and incomplete information.
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