Libya is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
Libya has not yet undertaken a Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards.
EU Commission’s list of AML/CFT deficient countries
On 13 February 2019, the EU Commission adopted a new list of 23 third countries that had been identified as having strategic deficiencies in their anti-money laundering and counter-terrorist financing frameworks as defined under the Fourth and Fifth Anti-Money Laundering Directives. Libya has been included on this list. This list currently includes all countries currently on the FATF AML deficiency lists together with 11 additional jurisdictions.
It is noted that to date the EU Member States have declined to adopt this list. However, as this country has been identified as having AML deficiencies by the EU Commission, we have rated it accordingly.
US Department of State Money Laundering assessment (INCSR)
Libya 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: -
Libya is not a regional or offshore financial center. In 2015, the government appointed by the Libyan House of Representatives is based in the eastern city of Bayda, while a competing, self- proclaimed, unrecognized “government” operates from Tripoli. The inability of the Libyan government to exercise control over Libya’s territory and institutions led to further degradation of Libya’s security and governance institutions and created increased opportunities for criminals to operate in Libya. In addition to political conflict, armed militias, former revolutionaries, and tribes within Libya engage in criminal activity for profit, including theft, weapons trafficking, and extortion.
Libya remains heavily dependent on the hydrocarbons sector for government income, with some estimates that over 90 percent of government income is based on oil revenues. Libya’s oil and gas exports remained well below the 1.6 million barrels per day capacity throughout all of 2015 due to the conflict and concomitant extortion by local groups, widening the budget deficit. Markets remain primarily cash-based, and informal value transfer networks are present.
Libya’s geographic location, porous borders, and limited law enforcement capacity make it an attractive transit point for narcotics. Libya is also a transit and destination country for migrants from sub-Saharan Africa, whose movement across borders is facilitated by weak Libyan government border management institutions and the de facto management of border regions by locally-based tribal networks and non-government forces. Libya also is a source, destination, and transit point for smuggled goods, including government-subsidized items, such as fuel and food, as well as black market and counterfeit goods from sub-Saharan Africa, Egypt, and China. Corruption remains a serious problem.
A shortage of foreign currency led to a growth in the black market for currency trading, where the dinar was actively trading at double its official rate throughout most of 2015. The currency control regime and lack of access to foreign currency have increased money laundering in Libya. There are reports of fraudulently-invoiced foreign trade transactions. Some media reports indicated that, as of September, 139 empty port containers had arrived at the Misrata port and were indicative of money laundering; allegedly companies were using the empty containers’ associated letters of credit and fake invoices to obtain hard foreign currency at the official rate of exchange, then selling the foreign currency in the black market for double the amount of Libyan dinars. In these schemes the empty container serves as the ‘documentary evidence’ required by the customs authority to prove that goods for which foreign currency has been transferred abroad have actually arrived in Libya. The Central Bank of Libya (CBL) has accused commercial bank officials of being involved in this money laundering by issuing fake letters of credit for goods that are never actually imported.
Sanctions remain in effect targeting specific Libyan nationals and entities. UNSCR 2213 (2015) reaffirms that the travel ban and asset freeze, first imposed in 2011, also applies to individuals and entities determined by the Sanctions Committee to be engaging in or providing support for other acts that threaten the peace, stability, or security of Libya or obstruct or undermine the successful completion of its political transition. On March 19, 2014, the UN Security Council adopted Resolution 2146/2014 banning illicit crude oil exports from Libya and authorizing inspection of suspect ships on high seas. UNSCR 2213 also extends the measures imposed by this resolution.
UN, EU and US sanctions in place that include an arms embargo, travel ban and assets freeze on the family of Muammar Al-Qadhafi and certain government officials.
The Arab League (comprising 22 Arab member states), of which this country is a member, has approved imposing sanctions on Syria. These include: -
Cutting off transactions with the Syrian central bank
Halting funding by Arab governments for projects in Syria
A ban on senior Syrian officials travelling to other Arab countries
A freeze on assets related to President Bashar al-Assad's government
The declaration also calls on Arab central banks to monitor transfers to Syria, with the exception of remittances from Syrians abroad.
The Arab League has also boycotted Israel in a systematic effort to isolate Israel economically in support of the Palestinians, however, the implementation of the boycott has varied over time among member states. There are three tiers to the boycott. The primary boycott prohibits the importation of Israeli-origin goods and services into boycotting countries. The secondary boycott prohibits individuals, as well as private and public sector firms and organizations, in member countries from engaging in business with any entity that does business in Israel. The Arab League maintains a blacklist of such firms. The tertiary boycott prohibits any entity in a member country from doing business with a company or individual that has business dealings with U.S. or other firms on the Arab League blacklist.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 17
World Governance Indicator – Control of Corruption 2
Corruption presents a significant obstacle for companies doing business in Libya. All sectors in the Libyan economy suffer from widespread corruption; however, the public procurement sector and the oil industry are among the most affected. Bribery and favoritism are common practice in all sectors, and companies may struggle with unfair competition from state-owned businesses, which also dominate the local market. Corruption was rampant under Gaddafi's rule, and the situation has only worsened in the post-revolution period. The institutional framework to combat corruption is defected, and the rule of law is undermined by political instability and violence. The Libyan Constitution Drafting Assembly is still in the process of writing the constitution, resulting in all laws being derived from the Constitutional Declaration that came into force after the ousting of Gaddafi. Nonetheless, the judiciary and the security apparatus are ineffective, rendering the enforcement of the law as very weak. For further information - GAN Integrity Business Anti-Corruption Portal
Libya's economy, almost entirely dependent on oil and gas exports, struggled during 2015 as the country plunged into civil war and world oil prices dropped to seven-year lows. In early 2015, armed conflict between rival forces for control of the country’s largest oil terminals caused a decline in Libyan crude oil production, which never recovered to more than one-third of the average pre-Revolution highs of 1.6 million barrels per day. The Central Bank of Libya continued to pay government salaries to a majority of the Libyan workforce and to fund subsidies for fuel and food, resulting in an estimated budget deficit of about 49% of GDP.
Libya’s economic transition away from QADHAFI’s notionally socialist model has completely stalled as political chaos persists and security continues to deteriorate. Libya’s leaders have hindered economic development by failing to use its financial resources to invest in national infrastructure. The country suffers from widespread power outages in its largest cities, caused by shortages of fuel for power generation. Living conditions, including access to clean drinking water, medical services, and safe housing, have all declined as the civil war has caused more people to become internally displaced, further straining local resources.
Extremists affiliated with the Islamic State of Iraq and the Levant (ISIL) attacked Libyan oilfields in the first half of 2015; ISIL has a presence in many cities across Libya including near oil infrastructure, threatening future government revenues from oil and gas.
Agriculture - products:
wheat, barley, olives, dates, citrus, vegetables, peanuts, soybeans; cattle
petroleum, petrochemicals, aluminium, iron and steel, food processing, textiles, handicrafts, cement
Exports - commodities:
crude oil, refined petroleum products, natural gas, chemicals
Exports - partners:
Italy 32.1%, Germany 11.3%, China 8%, France 8%, Spain 5.6%, Netherlands 5.4%, Syria 5.3% (2015)
Imports - commodities:
machinery, semi-finished goods, food, transport equipment, consumer products
Imports - partners:
China 14.8%, Italy 12.9%, Turkey 11.1%, Tunisia 6.5%, France 6.1%, Spain 4.6%, Syria 4.5%, Egypt 4.4%, South Korea 4.3% (2015)
Other Useful Links