FATF Status

Nicaragua is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

Latest FATF Statement - 21 October 2022

The FATF notes Nicaragua’s progress in improving the elements of its AML/CFT regime covered by its action plan. Nicaragua has addressed technical deficiencies to meet the commitments of its action plan regarding strategic deficiencies in the areas that the FATF identified in February 2020. Nicaragua is therefore no longer subject to the FATF’s increased monitoring process.

However, the FATF is strongly concerned by the potential misapplication of the FATF Standards resulting in the suppression of Nicaragua’s non-profit sector. Nicaragua should continue to work with GAFILAT to improve further its AML/CFT regime, including by ensuring its oversight of NPOs is risk-based and in line with the FATF Standards. Nicaragua is strongly encouraged to continue cooperating with GAFILAT on this issue.

Compliance with FATF Recommendations

The latest follow-up to the Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Nicaragua was undertaken in 2021. According to that Evaluation, Nicaragua was deemed Compliant for 7 and Largely Compliant for 30 of the FATF 40 Recommendations. It was deemed Highly effective for 0 and Substantially Effective for 1 of the Effectiveness & Technical Compliance ratings.

​US Department of State Money Laundering assessment (INCSR)

Nicaragua is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

Overview

Nicaragua is not a regional financial center but remains vulnerable to money laundering due to corruption, lack of transparency, drug trafficking, a large informal sector, and politicized antimoney laundering/combating the financing of terrorism (AML/CFT) institutions.  The government’s failure to act against U.S.-designated officials, while pursuing dubious money laundering charges against opposition leaders, has tarnished its credibility.  The government’s actions have also raised concern that some people and entities with legal obligations to report activities may become political targets.

Over the past three years, the government has developed new policies, procedures, and controls, although reporting entities and experts have raised concerns about compliance with the new regimen.   

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           17

World Governance Indicator – Control of Corruption             8

Rampant corruption within Nicaragua's political circles impairs the functioning of state institutions and limits foreign investment. International companies report widespread favoritism and impunity among public officials. The judicial system functions under heavy political pressure, and courts are susceptible to corruption and manipulation by politicians and criminal organizations. High-risk areas for bribery include Nicaragua's tax and customs sectors, where the application of regulations and procedures is arbitrary and is plagued by extortion, facilitation payments and kickbacks. Nicaragua's anti-corruption legislation is comprehensive and addresses all major forms of corruption; including bribery, abuse of office, facilitation payments and gifts to public officials. Nevertheless, the law is not enforced effectively, allowing for pervasive corruption and creating a challenging business environment for foreign companies. For further information - GAN Integrity Business Anti-Corruption Portal

Investors should be extremely cautious about investing in Nicaragua. The regime of President Ortega and Vice President Murillo continues to suspend constitutionally guaranteed civil rights, detain political prisoners, seize private property, and disregard the rule of law, creating an unpredictable investment climate rife with reputational risk and arbitrary regulation.

After committing widespread electoral fraud and jailing opponents, the Ortega-Murillo regime secured a fourth consecutive presidential term in November 2021. In 2022, the regime revoked the legal registration and expropriated the assets of more than 3,000 nonprofit organizations – including environmental advocacy groups, private universities, Catholic-linked charities, and organizations that provide free dental and health care to impoverished children – ostensibly for being at high risk of money laundering and terrorist financing. In February 2023, shortly after releasing more than 200 political prisoners into the custody of the United States, the regime stripped each of their Nicaraguan citizenship, removed them from the civil registry, froze their bank accounts, and in several instances seized their properties.

The regime ramped up its repression of the Nicaraguan private sector in March 2023, revoking the legal registration and expropriating the assets of 19 of the nation’s leading business chambers. Business chambers had for decades played a crucial role in Nicaragua’s private sector as advocates for the business community on policy matters among other issues. Individual businesses must now interact directly with the Nicaraguan government, often at greater cost for firms and from a weaker negotiating position.

In 2020, the National Assembly approved six repressive laws that alarmed investors. Some of the most concerning include: a foreign agents law that requires organizations and individuals to report foreign assistance and prevents any person receiving foreign funding from running for office; and a consumer protection law that could prevent financial institutions from making independent decisions on whether to service financial clients, including OFAC-sanctioned entities. Tax authorities have seized properties following reportedly arbitrary tax bills and jailed individuals without due process until taxes were negotiated and paid. Arbitrary fines and customs inspections prejudice companies that use or sell imported products.

In response to the Ortega-Murillo regime’s deepening authoritarianism, almost all international financial institutions have stopped issuing new loans to Nicaragua, and most external financing will wind down by 2025. The regime’s hopes that a new economic partnership with the People’s Republic of China (PRC) would provide fresh investment and financing have not yet materialized.

Despite regime repression and growing poverty, Nicaragua continues to showstable macroeconomic fundamentals, including a record-high $4 billion in foreign reserves, a sustainable debt load, and a well-capitalized banking sector. Independent forecasts predict Nicaragua’s $14 billion economy will grow between 1.5 and 3 percent in 2023, down from a robust 10 percent post-pandemic expansion in 2021. Inflation rose to 11 percent year-on-year in January 2023, however, and remains a concern. The price of a basket of typical consumer goods and services – a key measure of inflation’s impact on the general population – rose to a record high of $514 per month in January 2023, more than double the minimum wage of $215. Some 200,000 formal sector jobs have disappeared from the economy, and Nicaraguan families now earn 15 percent less on average in real terms than in 2018. Following an unprecedent wave of hundreds of thousands of Nicaraguan migrants in the United States in 2022, remittances rose to a new record of $3.2 billion – or nearly 20 percent of Nicaragua’s GDP – driving local consumption and generating significant tax revenue.

Nicaragua’s economy still has significant potential for growth if investor confidence can be restored by strengthening institutions and improving the rule of law. Its assets include: ample natural resources; a well-developed agricultural sector; and ready access to major shipping lanes. The United States is Nicaragua’s largest trading partner – it is the source of 35 percent of Nicaragua’s imports and the destination of 65 percent of Nicaragua’s exports.

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Country Links

Central Bank of Nicaragua