Mozambique

Sanctions

No

FATF AML Deficient List

No

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.)
Failed States Index (Political Issues)(Average Score)

Medium Risk

World Governance Indicators (Average Score)

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ANTI-MONEY LAUNDERING

 

FATF Status

 

Mozambique is not on the FATF List of Countries that have been identified as having strategic AML deficiencies.

 

Compliance with FATF Recommendations

The latest follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Mozambique was undertaken by the Financial Action Task Force (FATF) in 2017 (original Mutual Evaluation published in 2011). According to that Evaluation, Mozambique was deemed Compliant for 3 and Largely Compliant for 8 of the FATF 40 + 9 Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

Mozambique was deemed a Jurisdiction of Primary Concern by the US Department of State  International Narcotics Control Strategy Report (INCSR). 

OVERVIEW

 

Money laundering in Mozambique is driven by cases of misappropriation of state funds, kidnappings, human trafficking, narcotics trafficking, and wildlife trafficking.  With a long and largely unpatrolled coastline, porous land borders, and a limited rural law enforcement presence, Mozambique is a major corridor for the movement of illicit goods, with narcotics typically trafficked through Mozambique to South Africa or on to further destinations, such as Europe. 

 

Although the Attorney General’s Office (PGR) and Bank of Mozambique (BOM) have shown a willingness to address money laundering and the Government of Mozambique has taken steps to improve the legal framework, attorneys, judges, and police lack the technical capacity and resources to combat money laundering successfully.  Mozambique would also benefit from better collaboration and information sharing AML enforcement institutions.  

 

Former Mozambican Finance Minister Manuel Chang, two unnamed Mozambicans, three exCredit Suisse bankers, and two others were indicted by a New York federal court for money laundering and other crimes committed using the U.S. financial system in relation to Mozambique’s $2 billion hidden debt scandal.  Chang was detained in South Africa on December 29, 2018, under a U.S. extradition request. Although the PGR referred 17 individuals, including Chang, to the GRM’s highest audit institution in January 2018 to mete out financial penalties related to the $2 billion in illicit debt, the PGR’s investigation resulted in no criminal

charges in 2018.  Lax oversight of government borrowing creates opportunities for misappropriation of state funds and the potential for money laundering to hide ill-gotten assets.

 

 

 

SANCTIONS

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

 

BRIBERY & CORRUPTION

 

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           23

World Governance Indicator – Control of Corruption             19

Companies looking to operate in Mozambique face a very high risk of corruption in most sectors. Forms of corruption range from petty bribes to deeply entrenched clientelistic and patronage systems, and donor countries have shown dissatisfaction over the country's anti-corruption efforts. Corruption is particularly prominent in public procurement and the tax and customs administrations. Even though a relatively well-established legal framework is in place, many loopholes exist. For instance, the Anti-Corruption Law does not cover all forms of corruption (e.g., embezzlement is not covered). The judiciary is generally considered corrupt and is subject to political influence, impeding the effective enforcement of the law. Gifts and facilitation payments are common when dealing with officials. For further information - GAN Integrity Business Anti-Corruption Portal

 

ECONOMY

At independence in 1975, Mozambique was one of the world's poorest countries. Socialist policies, economic mismanagement, and a brutal civil war from 1977 to 1992 further impoverished the country. In 1987, the government embarked on a series of macroeconomic reforms designed to stabilize the economy. These steps, combined with donor assistance and with political stability since the multi-party elections in 1994, propelled the country’s GDP from $4 billion in 1993, following the war, to about $34 billion in 2015. Fiscal reforms, including the introduction of a value-added tax and reform of the customs service, have improved the government's revenue collection abilities.

 

In spite of these gains, more than half the population remains below the poverty line. Subsistence agriculture continues to employ the vast majority of the country's work force. Citizens rioted in September 2010 after fuel, water, electricity, and bread price increases were announced. In an attempt to lessen the negative impact on the population, the government implemented subsidies, decreased taxes and tariffs, and instituted other fiscal measures.

A substantial trade imbalance persists, although aluminium production from the Mozal Aluminium Smelter has significantly boosted export earnings in recent years. In 2012, The Mozambican Government took over Portugal's last remaining share in the Cahora Bassa Hydroelectricity Company, a significant contributor to the Southern African Power Pool. The government has plans to expand the Cahora Bassa Dam and build additional dams to increase its electricity exports and fulfil the needs of its burgeoning domestic industries.

Mozambique's once substantial foreign debt was reduced through forgiveness and rescheduling under the IMF's Heavily Indebted Poor Countries (HIPC) and Enhanced HIPC initiatives. However, in 2013, the Mozambique Tuna Company (EMATUM) issued an $850 million bond fully guaranteed by the Mozambican government primarily for the purpose of purchasing tuna boats. The government is attempting to reschedule this debt, in the expectation that a pending deal with a consortium led by a US company will provide enough revenue to pay off this debt. The pending deal has the potential to transform Mozambique’s economy and dramatically increase GDP.

 

Mozambique grew at an average annual rate of 6%-8% in the decade up to 2015, one of Africa's strongest performances. Mozambique's ability to attract large investment projects in natural resources is expected to sustain high growth rates in coming years although weaker global demand for commodities is likely to weaken expected revenues from these vast resources, including natural gas, coal, titanium, and hydroelectric capacity.

 

Agriculture - products:

cotton, cashew nuts, sugarcane, tea, cassava (manioc, tapioca), corn, coconuts, sisal, citrus and tropical fruits, potatoes, sunflowers; beef, poultry

 

Industries:

aluminium, petroleum products, chemicals (fertilizer, soap, paints), textiles, cement, glass, asbestos, tobacco, food, beverages

 

Exports - commodities:

aluminium, prawns, cashews, cotton, sugar, citrus, timber; bulk electricity

 

Exports - partners:

South Africa 24.9%, China 10.2%, Italy 8.9%, India 8.9%, Belgium 7.9%, Spain 4.4% (2015)

 

Imports - commodities:

machinery and equipment, vehicles, fuel, chemicals, metal products, foodstuffs, textiles

 

Imports - partners:

South Africa 26.8%, China 19.3%, India 13.9% (2015)

 

Investment Climate  -  US State Department

After a decade of consistently high growth rates and relative macroeconomic stability led to record investment flows in 2014, both foreign and domestic investment in Mozambique fell in 2015. Various factors could further depress investment in 2016: a high current account deficit, double digit inflation, currency volatility, the worst drought in decades, and rapid accumulation of debt approaching unsustainable levels.

 

However, vast untapped natural resources and large infrastructure and development needs still offer great opportunities to the U.S. investor. Mozambique averaged 7% GDP growth over the last decade and despite the downward revision in 2016 projections, Mozambique’s economy remains on track to outperform the rest of the continent. Mid- and long-term projections still indicate consistently high growth rates driven by natural resource exploration and production, construction, and exploiting largely untapped agricultural potential. The government of Mozambique (GRM) is receptive to foreign investment, and American companies have successfully competed for projects in various sectors.

 

Mozambique remains a challenging place to do business. Investors must factor in widespread corruption, bureaucracy, legal and regulatory uncertainty, an underdeveloped financial system, poor infrastructure, and high on-the-ground costs. Surface transportation inside the country is slow and expensive, while bureaucracy, port inefficiencies, and corruption complicate imports. Maritime transport linking the national ports is insignificant. Macroeconomic issues in 2016 are expected to exert substantial pressure on small and medium-sized enterprises. Less than transparent government contracting in recent years suggests more rent-seeking and elite capture of increasing revenues from natural resources and other sources. Local labor law greatly limits hiring foreign workers, even when domestic labor lacks the required skills. These factors continue to hinder business registration, expansion, and sustainability and in 2015, Mozambique dropped five places in the World Bank's annual “Doing Business” report. In response, the Ministry of Industry and Commerce (MIC) has said it will lead efforts to implement reforms to improve Mozambique’s standing. Mozambique has begun sharing draft local content legislation with the private sector.

Traditionally, South Africa has been Mozambique's largest trading partner. Other significant trading partners in 2015 include the United Arab Emirates, Italy, China, Portugal, and Mauritius. The United States had been a relatively minor trading partner, but has risen to become the second largest source of foreign direct investment, thanks to major investments in the oil and gas sector. There is also significant U.S. investment in tobacco production.

 

 

Country Links
Bank of Mozambique
Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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