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 follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Lesotho was undertaken by the Financial Action Task Force (FATF) in 2017 (the original Mutual Evaluation report was published in 2010). According to that Evaluation, Lesotho was deemed Compliant for 4 and Largely Compliant for 1 of the FATF 40 + 9 Recommendations.


US Department of State Money Laundering assessment (INCSR)

Lesotho 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: -


Lesotho is neither a regional nor an offshore financial center. Money laundering is related primarily to corruption and tax evasion. While there is no significant black market for smuggled goods in the country, undeclared and under-declared items pass daily between Lesotho and South Africa over the countries’ extensive and porous land border. The smuggling is low level and largely committed by individuals. Smugglers commonly bring undeclared consumer goods or, occasionally, larger items like automobiles from South Africa into Lesotho. Smaller items are smuggled to avoid paperwork and other bureaucratic requirements, while larger items are smuggled to avoid paying import taxes at the borders.



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



Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           41

World Governance Indicator – Control of Corruption             56



Small, mountainous, and completely landlocked by South Africa, Lesotho depends on a narrow economic base of textile manufacturing, agriculture, remittances, and regional customs revenue. About three-fourths of the people live in rural areas and engage in animal herding and subsistence agriculture, although Lesotho produces less than 20% of the nation's demand for food. Agriculture is vulnerable to weather and climate variability.

Lesotho relies on South Africa for much of its economic activity; Lesotho imports 90% of the goods it consumes from South Africa, including most agricultural inputs. Households depend heavily on remittances from family members working in South Africa, in mines, on farms, and as domestic workers, though mining employment has declined substantially since the 1990s. Lesotho is a member of the Southern Africa Customs Union (SACU), and revenues from SACU accounted for roughly 44% of total government revenue in 2014. The South African Government also pays royalties for water transferred to South Africa from a dam and reservoir system in Lesotho. However, the government continues to strengthen its tax system to reduce dependency on customs duties and other transfers.

The government maintains a large presence in the economy - government consumption accounted for 37% of GDP in 2014 and the government remains Lesotho's largest employer. Access to credit remains a problem for the private sector. Lesotho's largest private employer is the textile and garment industry - approximately 36,000 Basotho, mainly women, work in factories producing garments for export to South Africa and the US. Diamond mining in Lesotho has grown in recent years and may contribute 8.5% to GDP by 2015, according to current forecasts.

Agriculture - products:

corn, wheat, pulses, sorghum, barley; livestock


food, beverages, textiles, apparel assembly, handicrafts, construction, tourism

Exports - commodities:

manufactures (clothing, footwear), wool and mohair, food and live animals, electricity, water, diamonds


Imports - commodities:

food; building materials, vehicles, machinery, medicines, petroleum products

Investment Climate  -  US State Department

The Government of Lesotho (GOL), through its National Strategic Development Plan, recognizes the critical role that domestic and foreign investment and the development of the private sector play in driving shared economic growth. The government actively encourages foreign direct investment (FDI) in all areas of the economy, with limited restrictions on foreign ownership of small businesses. Foreign investors enjoy the same rights and protections as Basotho investors. Lesotho’s standards of treatment and protection of foreign investors are good in practice, but the legal framework guaranteeing these norms remains weak. There is no foreign investment law, and there are limited bilateral investment treaties (BITs) to protect foreign investors and ensure their fair treatment.

Lesotho’s performance in attracting FDI has been credible by regional standards, particularly for a landlocked nation. In recent years, FDI inflows have been mainly driven by investments in the mining sector. Despite some political uncertainty, the investment climate is reasonably conducive to U.S. investment; Lesotho, a relatively small market of only 1.9 million people, is a member of the Southern African Customs Union (SACU) and the Southern African Development Community (SADC) market, which allows foreign businesses to use Lesotho as a gateway to larger regional markets.

The commercial legal, regulatory, and accounting systems are transparent and consistent with international norms. The judicial system is an effective means for enforcing property and contractual rights, though case backlogs can lead to a slow process. Lesotho has a written and consistently applied commercial law. A Commercial Court was established in 2010, with the support of a U.S. government-funded Millennium Challenge Corporation grant, in an effort to improve the country’s capacity in resolving commercial cases. Foreign investors have equal treatment before the courts in disputes with national parties or the government. The government has little history of investment disputes involving U.S. or other foreign investors or contractors in Lesotho, though in the past two year two foreign companies with government contracts have had disputes.

Though corruption remains a problem in Lesotho, no U.S. firms have identified corruption as an obstacle to foreign direct investment. Giving or accepting a bribe is a criminal act under the Prevention of Corruption and Economic Offences Act of 2006.

Lesotho is a member of the International Labor Organization (ILO) and has ratified 23 international labor conventions, including all the eight fundamental human rights instruments. Lesotho's Labor Code Order of 1992 and its subsequent amendments are the principal laws governing terms and conditions of employment in Lesotho. The law provides for freedom of association and the right to bargain collectively. The law stipulates that employers must allow union officials reasonable facilities for conferring with employees.

Lesotho has accomplished significant recent policy reforms, and the government plans to undertake further reforms. The Land Act of 2010 reformed the land tenure system, allowing foreign investors to hold land titles so long as 20% of the company is owned by local investors. The Land Act has also allowed the use of land as collateral, which has expanded access to credit. The Companies Act of 2011 reduced the time it takes to start a business from 40 days to five days and strengthened investor protections. As a result of these reforms, Lesotho’s rank in the World Bank’s Doing Business report improved from 153 in 2012 to 136 in 2014 to 114 in 2016.


Country Links
Central Bank of Lesotho
Other Useful Links
US State Department
Transparency International
World Bank
CIA World Factbook



FATF AML Deficiency List


Higher Risk

Non - Compliance with FATF MER Recommendations

Medium Risk

Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)