Lesotho Country Summary

FATF Status

Lesotho 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 Lesotho was undertaken in 2023. According to that Evaluation, Lesotho was deemed Compliant for 7 and Largely Compliant for 12 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 0 of the Effectiveness ratings.

Lesotho's Directorate on Corruption and Economic Offences (DCEO) is tasked with combating corruption through various laws and regulations, including financial disclosure requirements for public officials. Despite these efforts, corruption remains pervasive, particularly in government procurement and licensing, with the DCEO citing resource limitations as a barrier to effective enforcement. Additionally, Lesotho faces challenges related to human trafficking, drug smuggling, and financial crimes, exacerbated by political instability and weak governance structures.

Lesotho's economy is characterized by a reliance on sectors such as manufacturing, mining, agriculture, and construction, with significant challenges including declining orders in manufacturing, community conflicts in mining, and adverse weather impacts on agriculture. The government is actively seeking foreign direct investment (FDI) to enhance job creation and market diversification, but the lack of comprehensive investment policies and bureaucratic red tape poses obstacles for potential investors. Despite these challenges, Lesotho benefits from lower labor and operational costs compared to neighboring countries, and there is a growing focus on developing its renewable energy sector.

Lesotho's investment climate is characterized by the government's openness to foreign direct investment (FDI) and efforts to enhance the business environment, particularly in licensing and infrastructure. However, the lack of comprehensive investment policies and the introduction of regulations protecting local entrepreneurs create challenges for foreign investors. Despite these hurdles, the government is actively refining its services for investors and promoting sectors like renewable energy, which presents opportunities for growth.