FATF AML Deficiency List
Non - Compliance with FATF MER Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
US Dept of State Money Laundering assessment
Weakness in Government Legislation to combat Money Laundering
Timor-Leste 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 Timor-Leste was undertaken by the Financial Action Task Force (FATF) in 2012. According to that Evaluation, Timor-Leste was deemed Compliant for 1 and Largely Compliant for 14 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 4 of the 6 Core Recommendations.
US Department of State Money Laundering assessment (INCSR)
Timor Leste was deemed a Jurisdiction of Primary Concern by the US Department of State 2017 International Narcotics Control Strategy Report (INCSR) but has not been included since. Key Findings from the last report are as follows: -
Timor-Leste is a small economy, with limited data available regarding illicit funds and limited awareness, even by stakeholders, of money laundering issues. The most prevalent source of illicit proceeds is corruption, which a recent assessment described as “endemic” in the public sector. Capacity is low in government entities that supervise, enforce, and investigate suspicious financial transactions. The government has committed to increasing that capacity, as well as increasing awareness among the public and private sectors.
In 2016, Timor-Leste published its first National Risk Assessment of Money Laundering and Terrorist Financing (NRA) and adopted a National Action Plan (NAP) to address the areas of concern identified in the NRA.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 40
World Governance Indicator – Control of Corruption 41
Since gaining independence in 1999, Timor-Leste has faced great challenges in rebuilding its infrastructure, strengthening the civil administration, and generating jobs for young people entering the work force. The development of offshore oil and gas resources has greatly supplemented government revenues. This technology-intensive industry, however, has done little to create jobs in part because there are no production facilities in Timor-Leste. Gas is currently piped to Australia for processing, but Timor-Leste has expressed interest in developing a domestic processing capacity.
In June 2005, the National Parliament unanimously approved the creation of the Timor-Leste Petroleum Fund to serve as a repository for all petroleum revenues and to preserve the value of Timor-Leste's petroleum wealth for future generations. The Fund held assets of $16.5 billion, as of December 2014. Oil accounts for 90% of government revenues, and the drop in the price of oil in 2014 has led to concerns about the long-term sustainability of government spending. The Ministry of Finance maintains that the Petroleum Fund is sufficient to sustain government operations for the foreseeable future.
Annual government budget expenditures increased markedly between 2009 and 2012 but dropped significantly in 2013-15. Historically, the government failed to spend as much as its budget allowed. The government has focused significant resources on basic infrastructure, including electricity and roads. Limited experience in procurement and infrastructure building has hampered these projects. The underlying economic policy challenge the country faces remains how best to use oil-and-gas wealth to lift the non-oil economy onto a higher growth path and to reduce poverty.
Agriculture - products:
coffee, rice, corn, cassava (manioc, tapioca), sweet potatoes, soybeans, cabbage, mangoes, bananas, vanilla
printing, soap manufacturing, handicrafts, woven cloth
Exports - commodities:
oil, coffee, sandalwood, marble
Imports - commodities:
food, gasoline, kerosene, machinery
After fourteen years of independence, Timor-Leste welcomes foreign investment and business development. Plagued by conflict and turmoil in the first decade of its formative period, Timor-Leste has experienced sustained peace and stability since 2008. A smooth government transition in 2015 is a further signal of the country’s readiness to move forward. The government is making a concerted effort to improve the country’s basic infrastructure, including roads, airports, electricity, and telecommunications. The government is also implementing a fiscal reform process that will bring its system into compliance with best practices, as it seeks to join the Association of Southeast Asian Nations (ASEAN). In addition, economic growth rates are consistently strong. However, challenges remain as the country is still struggling with incomplete and unclear legislation, inadequate regulatory mechanism, corruption, insufficient personnel capacity, and deficient infrastructure. The private sector is weak, and government’s ability to regulate industry is limited. The government offers investment incentives to offset some of these challenges including five, eight, or ten year tax holidays depending on the location of the investment. Investment opportunities outside of the oil and gas sector are increasing, with interest growing in the agricultural sectors, construction, telecommunication, and tourism. The government is also working on a major petroleum sector infrastructure project along the south coast and has created Special Economic Zones in Oecusse exclave and Atauro Island.
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