Tajikistan

Sanctions

No

FATF AML Deficient List

No

Higher Risk

US Dept of State Money Laundering assessment
Compliance with FATF 40 + 9 Recommendations
Not on EU White list equivalent jurisdictions
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Failed States Index (Political Issues) (Average Score)

Medium Risk

Weakness in Government Legislation to combat Money Laundering

Please reload

 

ANTI-MONEY LAUNDERING

FATF Status

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

Latest FATF Statement  -  24 October 2014

The FATF welcomes Tajikistan’s significant progress in improving its AML/CFT regime and notes that Tajikistan has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2011. Tajikistan is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Tajikistan will work with EAG as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Tajikistan was undertaken in 2018. According to that Evaluation, Tajikistan was deemed Compliant for 7 and Largely Compliant for 20 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 3 of the Effectiveness & Technical Compliance ratings.

 

 

US Department of State Money Laundering assessment (INCSR)

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

OVERVIEW

 

Money laundering associated with Tajikistan’s drug trade remains a dominant concern. 

Tajikistan lies on a major drug smuggling route connecting Afghanistan with Russian and

Eastern European markets.  In addition, a substantial amount of cash entering financial institutions in the country stems from pervasive corruption in Tajikistan, including bribes obtained from the drug trade.  

 

 

SANCTIONS

 

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              8

Corruption is a serious obstacle for companies operating or planning to invest in Tajikistan. It permeates almost all sectors of the economy. Networks of patronage and clientelism also impede a competitive business environment, and bribery and gifts are widespread practices and an established way of doing business. The government has established the necessary legal anti-corruption framework to curb corruption, criminalizing passive and active bribery, extortion, money laundering and other offenses. Nonetheless, enforcement of the law is poor and selective, and government officials engage in corruption without fear of repercussion, provided they do not fall out of favor with the ruling elite. For further information - GAN Integrity Business Anti-Corruption Portal

ECONOMY

Tajikistan is a poor, mountainous country with an economy dominated by minerals extraction, metals processing, agriculture, and reliance on remittances from citizens working abroad. The 1992-97 civil war severely damaged an already weak economic infrastructure and caused a sharp decline in industrial and agricultural production, and today, Tajikistan has one of the lowest per capita GDPs among the 15 former Soviet republics. Less than 7% of the land area is arable and cotton is the most important crop. Tajikistan imports approximately 60% of its food. Mineral resources include silver, gold, uranium, antimony, and tungsten. Industry consists mainly of small obsolete factories in food processing and light industry, substantial hydropower facilities, and a large aluminium plant - currently operating well below its capacity.

Because of a lack of employment opportunities in Tajikistan, more than one million Tajik citizens work abroad - roughly 90% in Russia - supporting families back home through remittances that have been equivalent to nearly 50% of GDP. Some experts estimate the value of narcotics transiting Tajikistan is equivalent to 30-50% of GDP.

Since the end of the devastating, five-year civil war, the country has pursued half-hearted reforms and privatizations, but the poor business climate remains a hurdle to attracting investment. Tajikistan has sought to develop its substantial hydroelectricity potential through partnership with Russian and Iranian investors, and is pursuing completion of the Roghun dam - which, if built according to plan, would be the tallest dam in the world. However, the project will take at least 8 to 11 years to construct and faces financing shortfalls and opposition from downstream Uzbekistan.

Recent slowdowns in the Russian and Chinese economies, low commodity prices, and currency fluctuations are hampering economic growth in Tajikistan. By some estimates, the dollar value of remittances from Russia to Tajikistan dropped by more than 65% in 2015. The government faces challenges financing the public debt, which is equivalent to 35% of GDP, and the National Bank of Tajikistan has aggressively spent down reserves to bolster the weakening somoni, leaving little space for fiscal or monetary measures to counter any additional economic shocks.

 

Agriculture - products:

cotton, grain, fruits, grapes, vegetables; cattle, sheep, goats

 

Industries:

aluminium, cement, vegetable oil

 

Exports - commodities:

aluminium, electricity, cotton, fruits, vegetable oil, textiles

 

Exports - partners:

Turkey 19.7%, Kazakhstan 17.6%, Switzerland 13.7%, Iran 8.7%, Afghanistan 7.5%, Russia 5.1%, China 4.9%, Italy 4.8% (2015)

 

Imports - commodities:

petroleum products, aluminium oxide, machinery and equipment, foodstuffs

 

Imports - partners:

China 42.3%, Russia 17.9%, Kazakhstan 13.1%, Iran 4.7% (2015)

 

Investment Climate  -  US State Department

Tajikistan is a fragile and landlocked country located in Central Asia. Tajikistan presents limited opportunities for investors who are willing to put significant research and effort into market development, and who have experience with the area. The Government of Tajikistan has expressed interest in attracting more U.S. investment, but is still working to implement reforms that will allow it to become a more competitive investment destination.

 

In 2015, Russia’s economic crisis affected Tajikistan’s economy severely. According to the Ministry of Labor, Migration, and Employment of Tajikistan, remittances in 2015 were equivalent to 34-35 percent of GDP – a drop from 2014 when remittances were roughly equivalent to 50 percent of Tajikistan’s GDP. Remittances are typically transferred to Tajikistan in Russian rubles; these money transfers lost between 42 and 66 percent of their value in dollar terms as the ruble devalued faster than the Tajik somoni. The result was at least a 30 percent drop in Tajik real incomes, as well as a depreciation of the somoni.

Each year up to one million Tajiks work abroad, primarily in Russia. In 2015, the number of Tajik migrants working in Russia decreased not only because of fewer work opportunities there, but also due to entry bans introduced by Russian migration authorities. According to the latest available information, 300,000 Tajiks are on this work “blacklist.” In 2015, migrant workers sent home roughly $2.2 billion through the banking system as well as other informal channels, a $1.7 billion decrease compared to 2014. Tajik authorities and international experts forecast that a continued ruble devaluation and slowing Russian economy, along with new restrictions placed on migrant employment in Russia, will likely continue to decrease Tajikistan’s remittance inflow in 2016. Reduced opportunities for migrant labor could result in markedly higher unemployment in Tajikistan.

 

Since small and medium-sized businesses already have limited access to finance in the local banking system, the depreciation of the ruble and somoni made dollar-based debt even more unattractive. The rate of non-performing loans in commercial banks soared to around 45 percent as of March 2016.

Tajikistan’s business environment also lacks predictability in terms of its regulatory regime. In spite of having over 200 different strategies and sectoral development programs, the Tajik authorities do not have capacity for either forecasting, or planning that responds to real circumstances in the country. In addition, the Tajik government does not manage risk appropriately; there is no concept of the “possibility to fail.”

 

Tajikistan became the 159th member of the World Trade Organization (WTO) March 2, 2013. At that time, Tajikistan adopted a new national Tax Code; however, even with this reform the tax system still remains complex. Due to the economic crisis, taxation of large companies (more than 100 employees) has become more aggressive and an “artistic” interpretation of the Tajik tax code became the norm. Businesses tell the embassy they feel like that are treated as “guilty” until proven innocent by the tax committee.

 

Tajikistan joined the 1961 Hague convention “On Abolishing the Requirement of Legalization for Foreign Public Documents” October 31, 2015 (http://mfa.tj/ru/novosti-i-sobytiya/nachalo-prostavleniya-apostilya-v-tadzhikistane.html). This accession should make it easier for investors to gain legal recognition of foreign contracts within Tajikistan.

Tajikistan has large-scale potential for hydroelectric power generation, and is poised to expand seasonal electricity exports to South Asian markets along the CASA-1000 power transmission line and planned future lines. Uzbekistan has raised concerns as a downstream country over the planned hydroelectric projects in Tajikistan by questioning their economic value; what Uzbekistan predominantly fears is loss of water flow to its predominantly agricultural land. New hydroelectric dam construction projects in Tajikistan represent a commercial opportunity for U.S. equipment manufacturers and construction firms. The Tajik government has also expressed an interest in developing its solar industry.

Outside of the major cities, Tajikistan currently faces electricity rationing between October 1 through March 31, due to its heavy reliance on seasonal hydropower. The implementation of proposed infrastructure projects or energy trade agreements to resolve the winter energy deficit could end seasonal rationing and spur significant economic development.

After demurring for years, the Government of Tajikistan is still considering joining the Russian-led Eurasian Economic Union. Should they apply for membership and be accepted, it could result in higher trade tariffs and greater difficulty for U.S. firms to invest in Tajikistan.

 

Country Links
Financial Monitoring Department (FMD)​
National Bank of the Republic of Tajikistan
Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

KnowYourCountry Limited has achieved ISO 9001:2015 Certification for the provision of on-line information of money laundering and sanction information on a country by country basis

© 2019 - KnowYourCountry Limited