Laos

Sanctions

No

FATF AML Deficient List

No longer on list

Higher Risk

US Dept of State Money Laundering assessment
Non - Compliance with FATF 40 + 9 Recommendations
Weakness in Government Legislation to combat Money Laundering
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

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

 

FATF Statement re AML Strategic Deficiencies:  23 June 2017


The FATF welcomes Lao PDR’s significant progress in improving its AML/CFT regime and notes that Lao PDR 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 January 2015. Lao PDR is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Lao PDR will work with APG 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 Laos was undertaken by the Financial Action Task Force (FATF) in 2011. According to that Evaluation, Laos was deemed Compliant for 1 and Largely Compliant for 2 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for all 6 of the Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

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

OVERVIEW

 

Over the last year, Laos made significant progress in enhancing its AML/CFT regime.  In 2018,

Laos’ Anti-Money Laundering Intelligence Office (AMLIO), the Lao FIU, partnered with donors to complete Laos’ first-ever national risk assessment (NRA); upgraded its IT systems; held multiple workshops and training seminars throughout the country to raise awareness of AML/CFT issues and to build capacity among law enforcement and judicial officials; and finished drafting two important decrees focused on AML prosecutions.  AMLIO has also funded the training of one staff member to be an assessor on mutual evaluations, and international partners have ongoing projects aimed at enhancing Laos’ ability to prosecute money laundering cases and to build the capacity of law enforcement officials.   

 

The new Lao penal code took effect in November 2018.  The new penal code contains articles that define terrorism financing and money laundering and sets forth specific penalties for various crimes. 

 

SANCTIONS

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

 

BRIBERY & CORRUPTION

 

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           29

World Governance Indicator – Control of Corruption             16

Corruption is a high risk for companies operating in Laos and deters foreign investment. Political patronage pervades all business sectors, and a culture of corruption has been perpetuated by senior LPRP (Lao People's Revolutionary Party) leaders and by foreign investors willing to buy political support and pay off officials. Petty bribery is another dimension of corruption in Laos; companies are likely to encounter this when trading across borders, paying taxes or acquiring public services. The judiciary is weak and inefficient, thus impeding the proper enforcement of anti-corruption laws. The Law Against Corruption criminalizes abuse of power, embezzlement, passive bribery and fraud in the public sector, but officials are rarely prosecuted. For further information - GAN Integrity Business Anti-Corruption Portal

 

ECONOMY

The government of Laos, one of the few remaining one-party communist states, began decentralizing control and encouraging private enterprise in 1986. Economic growth averaged 6% per year from 1988-2008 except during the short-lived drop caused by the Asian financial crisis that began in 1997. Laos' growth has more recently been amongst the fastest in Asia and averaged nearly 8% per year for the last decade.

Nevertheless, Laos remains a country with an underdeveloped infrastructure, particularly in rural areas. It has a basic, but improving, road system, and limited external and internal land-line telecommunications. Electricity is available to 83% of the population. Agriculture, dominated by rice cultivation in lowland areas, accounts for about 25% of GDP and 73% of total employment.

Laos' economy is heavily dependent on capital-intensive natural resource exports. The economy has benefited from high-profile foreign direct investment in hydropower dams along the Mekong River, copper and gold mining, logging, and construction, although some projects in these industries have drawn criticism for their environmental impacts.

Laos gained Normal Trade Relations status with the US in 2004 and applied for Generalized System of Preferences trade benefits in 2013 after being admitted to the World Trade Organization earlier in the year. Laos began a one-year chairmanship of ASEAN in January 2016. Laos is in the process of implementing a value-added tax system. The government appears committed to raising the country's profile among foreign investors and has developed special economic zones replete with generous tax incentives, but a small labour pool remains an impediment to investment. Laos also has ongoing problems with the business environment, including onerous registration requirements, a gap between legislation and implementation, and unclear or conflicting regulations.

Agriculture - products:

sweet potatoes, vegetables, corn, coffee, sugarcane, tobacco, cotton, tea, peanuts, rice; cassava (manioc, tapioca), water buffalo, pigs, cattle, poultry

Industries:

mining (copper, tin, gold, gypsum); timber, electric power, agricultural processing, rubber, construction, garments, cement, tourism

Exports - commodities:

wood products, coffee, electricity, tin, copper, gold, cassava

Exports - partners:

Thailand 30.4%, China 27%, Vietnam 17.6% (2015)

Imports - commodities:

machinery and equipment, vehicles, fuel, consumer goods

Imports - partners:

Thailand 60.9%, China 18.6%, Vietnam 7.3% (2015)

Investment Climate  -  US State Department

Laos, officially the Lao People’s Democratic Republic (Lao PDR), is a rapidly growing developing economy at the heart of Southeast Asia, bordered by Burma, Cambodia, China, Thailand, and Vietnam. Laos’ economy has grown at an annual average of eight percent for a decade, placing Laos amongst the fastest growing economies in the world. Over the last thirty years, Laos has made slow but steady progress in implementing reforms and building the institutions necessary for a market economy, culminating in accession to the World Trade Organization (WTO) in February 2013.

The Lao government’s commitment to WTO accession and the creation of the ASEAN Economic Community (AEC) in 2015 led to major reforms of economic policies and regulations aimed at improving the business and investment environment. The Lao government is increasingly tying its economic fortunes to the economic integration of ASEAN and export-led development.

The rapid economic growth of the country has been driven by the exploitation of natural resources and development of hydropower, with both sectors largely led by foreign investors. However, the government recognizes that growth opportunities in these industries are finite, and has prioritized the development of high-value agriculture, light manufacturing, and tourism while continuing development of a range of energy resources and improving electrical transmission capacity to neighboring countries.

Laos in 2016 holds the rotating chairmanship of ASEAN, and has chosen to use its chairmanship to focus on ASEAN “connectivity.” The Lao government hopes to leverage its lengthy land borders with Burma, China, Thailand, and Vietnam, and to implement policies that showcase Laos not as landlocked, but “land-linked,” providing easy access to larger, emerging neighbor economies. The government hopes to increase exports of agriculture, manufactured goods, and electricity to its more industrialized neighbors.

Some businesses and international investors are beginning to use Lao production bases as an opportunity to reach the broader Mekong region, including southern China. Others are placing parts of their global value chains in Laos, often as a way to diversify from existing production bases in Thailand. The Special Economic Zone in Savannakhet has successfully attracted major manufacturers from Europe, North America, and Japan.

Economic progress and trade expansion in Laos remain hampered by a shortage of workers with technical skills, weak education and health care systems, and poor—although improving—transportation infrastructure. Institutions, especially in the justice sector, remain highly underdeveloped and regulatory capacity is low. Investors report that corruption at all levels is a major concern.

The lack of clarity in policy and the uneven application of law are disincentives to further foreign investment in the country. The Lao government is making efforts to improve and its five-year plan directs the government to formulate “policies that would attract investments” and to “begin to implement public investment and investment promotion laws.” Investors, however, have found that practice has not yet caught up with the spirit of new laws. Furthermore, the multiple ministries and three separate methods for foreign investment into Laos lead to confusion, with many potential investors turning to either engaging local partners or law firms to navigate the often confusing bureaucracy, or turning their efforts entirely toward other countries in the region.

 

 

Country Links

Bank of Lao PDR
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