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)
Romania 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 Romania was undertaken by the Financial Action Task Force (FATF) in 2014. According to that Evaluation, Romania was deemed Compliant for 7 and Largely Compliant for 18 of the FATF 40 + 9 Recommendations.
MoneyVal Plenary - 1st June 2017: Fourth round follow-up: interim follow-up report by Romania
Romania’s 4th round MER was adopted in April 2014. Two years later, in April 2016, the country presented a first interim report under the regular follow-up process. The Secretariat noted that, although a number of legislative remedial actions had been prepared, limited concrete progress had been achieved. Romania was asked then to report back at the present Plenary and was encouraged to apply for removal from followup on that occasion.
At the present Plenary, the Secretariat noted that three key legislative processes were still underway: amendments to the AML/CFT Law aimed at addressing major deficiencies under R.26; a new AML/CFT intended to transpose the 4th EU AML Directive into national legislation; and amendments to the Emergency Ordinance on the implementation of international sanctions. Since none of those draft pieces of legislation were in force by the time it prepared its analysis, the Secretariat was not in a position to conduct a detailed evaluation of progress reported by Romania. However, it noted that the envisaged changes could address a number of significant gaps identified under the core and key Recommendations in the MER. During the Plenary meeting, Romania informed the Secretariat that the amendments to the AML/CFT law had been promulgated by the President of the Republic on 31 May.
Considering the expected timeframe for the adoption of the other two pieces of legislation (i.e. by the end July regarding the new AML/CFT law; by end of year regarding the amendments to the Emergency Ordinance), the Plenary asked Romania to report back at the 56th Plenary in April 2018, with a view to applying for exit from follow-up on that occasion. This would be in line with the four-year deadline for exit from follow-up set by the revised Rule 13 of MONEYVAL’s 4th round rules of procedure.
US Department of State Money Laundering assessment (INCSR)
Romania was deemed a Jurisdiction of Concern by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
Romania’s geographical location makes it a natural transit country for trafficking in narcotics, arms, stolen vehicles, and persons by transnational organized criminal groups. As a result, Romania is vulnerable to financial activities associated with such crimes, including money laundering. Romania’s economy remains to a large extent cash-based, and the size of the shadow economy is approximately 22 percent of GDP. Fiscal evasion and proceeds of crime generated in Romania are estimated to be approximately 15 percent of GDP.
Though Romania is not a major financial hub and its exposure to foreign proceeds of crime may be limited, there are nevertheless indicators suggesting that organized criminal groups from the neighboring countries and Italy invest in Romanian assets. Romanian organized criminal groups participate in a wide range of criminal activities in Europe, including prostitution, cigarette smuggling, extortion, and trafficking in narcotics, and have collaborated to establish international criminal networks for internet fraud activities and related money laundering schemes. Romania has some of the highest rates of cybercrime and online credit card fraud in the world. Studies have found Romanian servers to be the second largest source of cybercrime transactions worldwide. Although a majority of their victims reside in the United States, Romanian cybercriminals are increasingly targeting victims elsewhere in Europe as well as in Romania itself.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 44
World Governance Indicator – Control of Corruption 51
Corruption is a serious problem in Romania and raises the risks of doing business in the country. Foreign investors complain of complicated procedures, arbitrary application of rules and requests for bribes when resolving administrative tasks related to business operations. The Romanian Criminal Code and other supporting laws criminalize active and passive bribery, including bribery of foreign officials. A company can be held criminally liable for corruption offenses committed by individuals acting on its behalf. The government, however, does not enforce anti-corruption laws effectively and impunity is widespread. Early 2017 saw large numbers of protesters take to the streets of Bucharest to protest a decree that would have shielded many officials from corruption charges. The decree was ultimately rescinded. Petty corruption is a problem in Romania as irregular payments and bribes are common practice. The law does not distinguish between bribes and facilitation payments, and gifts and hospitality may be considered illegal depending on their intent and the benefit obtained. For further information - GAN Integrity Business Anti-Corruption Portal
Romania, which joined the EU on 1 January 2007, began the transition from communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs. Romania's macroeconomic gains have only recently started to spur creation of a middle class and to address Romania's widespread poverty. Corruption and red tape continue to permeate the business environment.
In the aftermath of the global financial crisis, Romania signed a $26 billion emergency assistance package from the IMF, the EU, and other international lenders, but GDP contracted until 2011. In March 2011, Romania and the IMF/EU/World Bank signed a 24-month precautionary standby agreement, worth $6.6 billion, to promote fiscal discipline, encourage progress on structural reforms, and strengthen financial sector stability; no funds were drawn. In September 2013, Romanian authorities and the IMF/EU agreed to a follow-on standby agreement, worth $5.4 billion, to continue with reforms. This agreement expired in September 2015, and no funds were drawn. Progress on structural reforms has been uneven, and the economy still is vulnerable to external shocks.
Economic growth rebounded in 2013-15, driven by strong industrial exports and excellent agricultural harvests, and the fiscal deficit was reduced substantially. Industry outperformed other sectors of the economy in 2015. Exports remained an engine of economic growth, led by trade with the EU, which accounts for roughly 70% of Romania trade. Domestic demand was a second driver, due to the mid-2015 cut, from 24% to 9%, of the VAT levied upon foodstuffs. In 2015, the government of Romania succeeded in meeting its annual target for the budget deficit, the external deficit remained low, even if it rose due to increasing imports. For the first time since 1989, inflation turned into deflation, allowing for a gradual loosening of monetary policy throughout the period.
An aging population, significant tax evasion, insufficient health care, and an aggressive loosening of the fiscal package jeopardize the low fiscal deficit and public debt and are the economy's top vulnerabilities.
Agriculture - products:
wheat, corn, barley, sugar beets, sunflower seed, potatoes, grapes; eggs, sheep
electric machinery and equipment, auto assembly, textiles and footwear, light machinery, metallurgy, chemicals, food processing, petroleum refining, mining, timber, construction materials
Exports - commodities:
machinery and equipment, other manufactured goods, agricultural products and foodstuffs, metals and metal products, chemicals, minerals and fuels, raw materials
Exports - partners:
Germany 19.8%, Italy 12.5%, France 6.8%, Hungary 5.4%, UK 4.4% (2015)
Imports - commodities:
machinery and equipment, other manufactured goods, chemicals, agricultural products and foodstuffs, fuels and minerals, metals and metal products, raw materials
Imports - partners:
Germany 19.8%, Italy 10.9%, Hungary 8%, France 5.6%, Poland 4.9%, China 4.6%, Netherlands 4% (2015)
Investment Climate - US State Department
Romania welcomes all forms of foreign investment. The government provides national treatment for foreign investors, meaning that the government does not differentiate treatment due to source of capital. Romania’s strategic location, membership in the European Union, relatively well-educated workforce, competitive wages, and abundant natural resources make it a desirable location for firms seeking to access European, Central Asian and near East markets. U.S. investors have found opportunities in the information technology, telecommunications, energy, services, manufacturing, and consumer products sectors.
The investment climate in Romania is a mixed picture, and potential investors should undertake due diligence when considering any investment. The Romanian government has taken steps in recent years to improve tax administration and collection, enhance transparency, and support a legal framework conducive to foreign investment. Romania’s judicial effort to combat high and medium-level corruption has become increasingly credible. The present government plans to launch ambitious and wide-ranging efforts to cut red tape, encourage investment, and reform Romania’s public administration. Another positive highlight has been the Romanian government’s sale of a minority stakes in several State Owned Enterprises (SOEs) in key sectors, such as energy generation and exploitation. Through these Initial and Secondary Public Offerings, the Romanian government has exposed its SOEs to heightened standards of corporate governance and has attracted additional international investors, bolstering Romania’s capital markets. Nevertheless, the development and enforcement of corporate governance codes in SOEs remains incomplete. Privatization stalled in 2015 and 2016.
While the current Government has initiated changes to procedures to increase stakeholder consultations and regulatory impact assessments, it has used emergency measures to pass legislation, to overcome difficulty in timely passage through parliament. Past governments levied taxes on energy infrastructure that were due to expire in December 2015; the current government extended these taxes by one year to December 2016. The government is in the process of revising upstream oil and gas taxation.
Additionally, the parliament routinely fails to consult with stakeholders or undertake impact analyses before passing economic legislation. The arbitrary passage of ill-conceived economic legislation can serve as a disincentive to U.S. and multinational investment. The new government has made significant strides to combat corruption, particularly at the national level, but corruption remains an ongoing challenge. Inconsistent enforcement of existing laws, including those related to the protection of intellectual property rights, also serves as a disincentive to investment. Continuing to attract and retain additional foreign direct investment will require further progress on transparency, stability, and predictability in economic decision-making, and reduction of non-transparent bureaucratic procedures.
Group of States against Corruption (GRECO) publishes third round compliance report on Romania - Conclusions (December 2012)
Concerning incriminations, Romania has gone through a very comprehensive and commendable legislative reform process regarding its criminal law. Together with the recently introduced proposals for amendments to the Law on the implementation of the New Criminal Code, the provisions of the New Criminal Code (adopted by the parliament in 2009 and waiting for final promulgation with the entering into force of the LNCC on 1 February 2014), can be expected to respond to the requirements of most of the recommendations. That said, GRECO regrets that the authorities have not changed their adverse stance to widening the application of bribery and trading in influence provisions to the acts/omissions that are not under the official’s competence and to revising and amending the effective regret provisions. GRECO can only urge the authorities to complete the reform process and to finally enact the New Criminal Code.
Insofar as the transparency of political funding is concerned, GRECO notes with satisfaction the process engaged to amend the legislation on the financing of political parties and election campaigns, and the support expressed by the Parliament to this process. If adopted, the amendments would fill a number of gaps identified in the Evaluation Report. In particular, the public will have access to the annual financial statements of political parties. GRECO is particularly pleased to see that all recommendations are being taken into consideration and that the Permanent Electoral Authority seems to be progressively consolidating its position and authority. GRECO encourages Romania to pursue its efforts towards the completion of the reform process and the broadest implementation of all recommendations addressed to it.
In view of the above, GRECO notes that Romania has been able to demonstrate that substantial reforms with the potential of achieving compliance with the pending recommendations within the next 18 months are underway. It should be added that the new Criminal Code will enter into force on 1 February 2014 and this is an important factor for the implementation of recommendations of Theme I. GRECO therefore concludes that the current low level of compliance with the recommendations is not globally unsatisfactory in the meaning of Rule 31, paragraph 8.3 of GRECO’s Rules of Procedure. GRECO invites the Head of the delegation of Romania to submit additional information regarding the implementation of recommendations i to vii (Theme I – Incriminations) and recommendations i, iii to v, vii to ix and xi to xiii (Theme II – Transparency of Party Funding) by 30 June 2014 at the latest.
Read Full Report (pdf file)
3 January 2014 - Transparency International demands repeal of legal changes granting immunity to Romanian politicians
Transparency International demands the immediate repeal of new legal amendments passed earlier this week in Romania that exempts the president, as well as members of the Chamber of Deputies and the Senate from corruption charges while in office. These developments risk opening the door for corrupt politicians to act with impunity.
The Chamber of Deputies recently adopted two amendments to the Criminal Code through which all appointed or elected officials are no longer criminally liable for corruption charges against them. Debate on the law was hidden from the public, nor was civil society consulted before voting on the changes in law.
Transparency International also demands that all changes to legislation like those on the immunity of lawmakers from corruption charges be transparently debated with civil society in advance of voting. If done this way, Romania would have avoided the huge national and international outcry over this new law.
We take this opportunity to underline that the Criminal Code has to be reviewed and improved before coming into force in February 2014.
Transparency International will closely monitor this situation going forward.
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