FATF AML Deficiency List
US Dept of State Money Laundering assessment
Non - Compliance with FATF MER Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Weakness in Government Legislation to combat Money Laundering
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).
Money laundering in Mozambique is driven by misappropriation of state funds, kidnappings, human trafficking, narcotics trafficking, wildlife trafficking, and, potentially, terrorism. With a long, largely unpatrolled coastline, porous land borders, and limited rural law enforcement presence, Mozambique is a major corridor for illicit goods such as hardwoods, gemstones, wildlife products, and narcotics. Narcotics are typically trafficked through Mozambique to other African nations and then on to further destinations, such as Europe and the United States.
The Attorney General (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. However, attorneys, judges, and police lack the technical capacity and resources to combat money laundering successfully. Mozambique would also benefit from better collaboration between AML/CFT enforcement institutions. One international governance NGO assessed that in 2019 Mozambique had the highest risk of money laundering and terrorist financing out of 125 countries surveyed.
From 2013-14, a group of senior Mozambican officials, including the former finance minister, secretly negotiated over $2 billion in loans, much of which went to illegal bribes and other illicit payments to the government officials, bankers, and business people involved in the scheme. In 2019, three Credit Suisse bankers involved in the loans pled guilty in the United States to money laundering. While the PGR has arrested 20 individuals in Mozambique, including the son of a former president and the former director of Mozambique’s intelligence service, for their alleged roles in the hidden debt scandal, neither the PGR nor Administrative Court have proceeded with trials in Mozambique.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 25
World Governance Indicator – Control of Corruption 24
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
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
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.
Other Useful Links