FATF AML Deficiency List
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
Swaziland 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 Swaziland was undertaken in 2017 (original Mutual Evaluation done in 2011). According to the follow-up Evaluation, Swaziland was deemed Compliant for 2 and Largely Compliant for 4 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 5 of the 6 of the Core Recommendations.
US Department of State Money Laundering assessment (INCSR)
Swaziland was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
The Kingdom of Swaziland is not considered a regional financial center. The financial sector in the Kingdom is small and dominated by subsidiaries of South African financial institutions. The small size of the country, the limited capacity of its police and financial regulators, and its proximity to major cities in Mozambique and South Africa make it a transit country for illegal operations in those countries and, to some extent, for the rest of the southern African region.
Large sums of money are moved via cross-border transactions involving banks, casinos, investment companies, motor vehicle dealers, and savings and credit cooperatives. Proceeds from the sale or trade of marijuana, a large illicit export, are laundered in Swaziland. Income from public corruption, particularly in public procurement, is also laundered in Swaziland. Cash gained from illegal activities is sometimes used to buy commercial goods and to build houses on non-titled land.
There is a significant black market for smuggled consumer goods, such as cigarettes, liquor, and pirated CDs and DVDs, transited across the porous borders of Mozambique, South Africa, and Swaziland. There is a general belief that trade-based money laundering and value transfer exists in Swaziland. Some traders transact in cash only and not through banks. Human trafficking is widespread. Swazi officials believe the Kingdom to be at little risk of terrorism financing.
The Common Monetary Area provides a free flow of funds among South Africa, Swaziland, Lesotho, and Namibia, with no exchange controls. Cash smuggling reports are informally shared on the basis of reciprocity among the relevant host government agencies.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 33
World Governance Indicator – Control of Corruption 35
Surrounded by South Africa, except for a short border with Mozambique, Swaziland depends on South Africa for 60% of its exports and for more than 90% of its imports. Swaziland's currency is pegged to the South African rand, effectively relinquishing Swaziland's monetary policy to South Africa. The government is heavily dependent on customs duties from the Southern African Customs Union (SACU), and worker remittances from South Africa supplement domestically earned income. Swaziland’s GDP per capita makes it a lower middle income country, but its income distribution is highly skewed, with an estimated 20% of the population controlling 80% of the nation’s wealth. As of 2014, more than one-quarter of the adult population was infected by HIV/AIDS; Swaziland has the world’s highest HIV prevalence rate.
Subsistence agriculture employs approximately 70% of the population. The manufacturing sector diversified in the 1980s and 1990s, but manufacturing has grown little in the last decade. Sugar and wood pulp had been major foreign exchange earners until the wood pulp producer closed in January 2010, and sugar is now the main export earner. Mining has declined in importance in recent years. Coal, gold, diamond, and quarry stone mines are small scale, and the only iron ore mine closed in 2014.
With an estimated 40% unemployment rate, Swaziland's need to increase the number and size of small and medium enterprises and to attract foreign direct investment is acute. Overgrazing, soil depletion, drought, and floods are persistent problems. On 1 January 2015, Swaziland lost its eligibility for benefits under the US African Growth and Opportunity Act, resulting in the loss of thousands of jobs.
The IMF forecasted that Swaziland’s economy will grow at a slower pace in 2016/2017 because of a region-wide drought, which is likely to hurt Swaziland’s revenue from sugar exports and other agricultural products, and a decline in the tourism and transport sectors. Swaziland’s revenue from SACU receipts and remittances from Swazi citizens abroad will also decline in 2016/2017, making it harder to maintain fiscal balance.
Agriculture - products:
sugarcane, cotton, corn, tobacco, rice, citrus, pineapples, sorghum, peanuts; cattle, goats, sheep
coal, forestry, sugar, soft drink concentrates, textiles and apparel
Exports - commodities:
soft drink concentrates, sugar, timber, cotton yarn, refrigerators, citrus and canned fruit
Imports - commodities:
motor vehicles, machinery, transport equipment, foodstuffs, petroleum products, chemicals
Investment Climate - US State Department
Swaziland is a landlocked kingdom located in Southern Africa. Swaziland's investment climate has become less conducive to U.S. investment due to increased government entanglement, corruption, and the higher costs involved with doing business. The official policy is to encourage foreign investment as a means to drive economic growth, but the pace of reforming investment policies is slow. In 2012, Swaziland re-launched its 2005 Investor Roadmap aiming to improve the country's competitiveness. The roadmap details procedural, administrative and regulatory barriers that hinder investment in the country and recommends regulatory reforms. Most of the identified reforms remain unaddressed. The implementation of the re-launch of the Investor Roadmap in 2012 is slowly progressing. The Swaziland Investment Promotion Authority (SIPA) advocates for foreign investors and facilitates regulatory approval, but lacks the political clout necessary to prevent unsolicited government and royal family interference in private business affairs. Recent positive developments include allowing for company registration online and amending the immigration laws to make it easier for foreign workers to remain in the country.
The Swaziland government has prioritized the energy sector, including particularly the renewable energy sector, and has developed a Grid Code and Independent Power Producer (IPP) Policy to create a transparent regulatory regime in this industry and attract investment. Swaziland imports 80 percent of its power from South Africa and Mozambique. With both South Africa and Mozambique experiencing electricity shortages, Swaziland is working on producing its own energy using renewable energy. Information, Communications and Technology (ICT) is also an emerging sector. Swaziland has embarked on a number of initiatives to spur the growth of this key sector such as e-governance and the construction of the Royal Science and Technology Park. The digital migration program of the Southern African Development Community (SADC) presents ICT opportunities in the country.
Incentives to invest in Swaziland include repatriation of profits, fully-serviced industrial sites, provision of purpose-built factory shells at competitive rates, and exemption from duty on raw materials for manufacture of goods to be exported outside the Southern African Customs Union (SACU). Financial incentives for all investors also include tax allowances and deductions for new enterprises, including a 10-year exemption from withholding tax on dividends and a low corporate tax rate of 10 percent for approved investment projects. New investors also enjoy duty-free import of machinery and equipment.
Increasingly, however, the government of Swaziland (GOS) is competing with the private sector through state owned enterprises (SOEs) or companies owned by the royal family. SOEs and the royal family’s private trust are invested in many industries and distort the economy through their influence. Virtually all large-scale investments in Swaziland involve, either by law or by custom, the participation of the government and the royal family as a partner. Public sector and royal family involvement in the economy discourages private investment and encourages monopolistic behavior, driving up prices and reducing competitiveness of the country. In addition, Swaziland’s land tenure system, where the majority of usable land remains the property of the King “in trust for the Swazi nation,” discourages long-term investment in commercial real estate and agriculture.
Swaziland’s poor human rights and labor rights record has jeopardized its access to export markets and to donor support. In 2015, Swaziland lost its duty free access to the U.S. market under the African Growth and Opportunity Act (AGOA) due to continued infringements on internationally recognized workers’ rights. Swaziland also remains ineligible for Millennium Challenge Corporation (MCC) support due to its poor rankings on political and civil liberties by international non-governmental organizations.
Other Useful Links