FATF AML Deficiency List
US Dept of State Money Laundering assessment
Corruption Index (Transparency International & W.G.I.)
Portugal is not on the FATF List of Countries that have been identified as having strategic AML deficiencies
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Portugal was undertaken by the Financial Action Task Force (FATF) in 2017. According to that Evaluation, Portugal was deemed Compliant for 12 and Largely Compliant for 22 of the FATF 40 Recommendations.
US Department of State Money Laundering assessment (INCSR)
Portugal was last deemed a Jurisdiction of Primary Concern in the US Department of State 2018 International Narcotics Control Strategy Report (INCSR). The Overview from that report was as follows: -
Portugal has AML laws and enforcement mechanisms that meet international standards and has taken steps in 2017 to further improve AML legislation. The majority of money laundered in Portugal is narcotics-related, according to Portuguese officials, who have noted significant criminal proceeds also come from corruption, trafficking in works of art and cultural artifacts, extortion, embezzlement, tax offenses, smuggling, prostitution, organized crime, gambling, and aiding or facilitating illegal immigration. Suspicious funds from Angola continue to be used to purchase Portuguese businesses and real estate. Portugal has taken steps throughout 2017 to strengthen its AML legislation; new laws decrease the size of payments that can legally be made in cash, create a national registry of transaction recipients, and compel attorneys to report suspected money laundering activities to authorities. In late 2017, Portugal proposed laws relaxing bank secrecy and allowing tax inspectors access to information on bank accounts suspected of being affiliated with money laundering.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 61
World Governance Indicator – Control of Corruption 77
Foreign companies operating in Portugal may encounter some instances of corruption, but they do not identify corruption as a problem for thier operations. Corruption and abuse of power are most prevalent at the municipal level, particularly in the areas of urban planning and public procurement. The Portuguese Criminal Code makes it illegal to give or accept a bribe, and there is a law (in Portuguese) that establishes the terms of liability for corruption offences in international trade and private activities. Amendments (in Portuguese) to the Criminal Code comply with GRECO, UN and OECD's recommendations on fighting corruption. Individuals and companies are criminally liable for corruption offences, including bribery of foreign public officials in international commerce. Facilitation payments are prohibited, and gifts and hospitality may be considered illegal depending on their intent. Recurring corruption scandals involving high-level politicians, local administrators and businesses abusing public funds have revealed that safeguards to counter corruption, and abuses of power have been somewhat inefficient in Portugal.
Portugal has become a diversified and increasingly service-based economy since joining the European Community - the EU's predecessor - in 1986. Over the following two decades, successive governments privatized many state-controlled firms and liberalized key areas of the economy, including the financial and telecommunications sectors. The country joined the Economic and Monetary Union in 1999 and began circulating the euro on 1 January 2002 along with 11 other EU members.
The economy grew by more than the EU average for much of the 1990s, but the rate of growth slowed in 2001-08. The economy contracted in 2009, and fell again from 2011 to 2014, as the government implemented spending cuts and tax increases to comply with conditions of an EU-IMF financial rescue package, signed in May 2011. A modest recovery began in 2013 and gathered steam in 2014 due to strong export performance and a rebound in private consumption. Although austerity measures were instituted to reduce the large budget deficit, they contributed to record unemployment and a wave of emigration not seen since the 1960s.
A continued reduction in private- and public-sector debt could weigh on consumption and investment in 2016, holding back a stronger recovery. The prior centre-right government passed legislation aimed at reducing labour market rigidity, and, this, along with sustained fiscal discipline, could make Portugal more attractive to foreign direct investment. Under the centre-right government, the budget deficit fell from 11.2% of GDP in 2010 to 3.5% in 2015, reaching the EU-IMF target of 4%, but still above its EU fiscal obligations, under the excessive deficit procedure. EU-IMF financing expired in May 2014. The new centre-left Socialist government, however, has signalled that it will unwind spending cuts associated with austerity while remaining within EU fiscal targets.
Agriculture - products:
grain, potatoes, tomatoes, olives, grapes; sheep, cattle, goats, pigs, poultry, dairy products; fish
textiles, clothing, footwear, wood and cork, paper and pulp, chemicals, lubricants, automobiles and auto parts, base metals, minerals, porcelain and ceramics, glassware, technology, telecommunications; dairy products, wine, other foodstuffs; ship construct
Exports - commodities:
agricultural products, foodstuffs, wine, oil products, chemical products, plastics and rubber, hides, leather, wood and cork, wood pulp and paper, textile materials, clothing, footwear, machinery and tools, base metals
Exports - partners:
Spain 25%, France 12.1%, Germany 11.8%, UK 6.7%, US 5.2%, Angola 4.2%, Netherlands 4% (2015)
Imports - commodities:
agricultural products, chemical products, vehicles and other transport material, optical and precision instruments, computer accessories and parts, semiconductors and related devices, oil products, base metals, food products, textile materials
Imports - partners:
Spain 32.9%, Germany 12.9%, France 7.4%, Italy 5.4%, Netherlands 5.1% (2015)
Investment Climate - US State Department
Portugal emerged from an extended economic crisis and successfully completed its European Union-IMF bailout program in 2014, registering moderate growth for 2014 and 2015 and decreasing, but still high, unemployment. The structural reforms implemented since 2011 have created an economic and regulatory climate that is favorable to foreign investment. Corporate taxes and unit labor costs have decreased, while new investment incentives have been established. The government has also taken important steps toward improving the efficiency of its judicial system, creating two specialized courts (for intellectual property and competition) and streamlining court districts and the Code of Civil Procedure.
Portugal’s economy is tightly coupled to the European Union (EU). Fellow EU member states remain Portugal’s biggest trading partners and its largest investors. Portugal complies with EU law for equal treatment of foreign and domestic investors. Outside of Europe, Portugal maintains significant links with former colonies Brazil, Angola, and Mozambique.
The European Central Bank (ECB) acts as central bank for the euro (€) and determines monetary policy for the 19 Eurozone member states, including Portugal. Portugal’s banking sector has faced a number of challenges over the past several years, including costly central bank-led restructuring of Banco Espirito Santo (succeeded by Novo Banco) in 2014 and Banif in 2015.
Following national legislative elections, a center-left Socialist government formed a minority government that has publicly promoted the importance of foreign investment and has projected an image of economic stability. However, recent events have generated negative press on the direction of the country’s investment climate. In one of its first actions, the Socialist government cancelled planned urban transportation concessions granted to British, Spanish, and French firms in the country’s two most populous cities, Lisbon and Porto. The current government also re-visited the privatization of the national airline TAP, completed under the previous administration. The parties eventually negotiated a deal to reduce the private purchaser’s stake in the company to a minority share with management control.
Actions of other government institutions have also raised questions regarding the country’s attitude toward foreign investment. In December 2015, the independent Bank of Portugal conducted a selective bail-in of certain bond issues of Novo Banco, imposing almost €2 billion in losses on mostly foreign investors, including several large U.S. investment funds. Fourteen international asset management firms affected by the decision filed suit in Portuguese courts in April 2016. Finally, in early 2016 Portugal’s newly elected president publicly expressed concerns against the alleged intensified foreign ownership of the country’s financial sector, which was broadly interpreted as an allusion to Spanish and Angolan controlling interests in several banks and reported Spanish interest in acquiring Novo Banco.
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