FATF Status

Zambia is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations

The latest Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Zambia was undertaken in 2022 . According to that Evaluation, Zambia was deemed Compliant for 11 and Largely Compliant for 17 of the FATF 40 Recommendations. It remains Highly Effective for 0 and Substantially Effective for 0 with regard to the 11 areas of Effectiveness of its AML/CFT Regime.

US Department of State Money Laundering assessment (INCSR)

Zambia 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: -

Zambia is not a major financial center. The proceeds of narcotics transactions, bribery, and public corruption are the main sources of laundered funds. Wildlife trafficking, human trafficking, and the timber trade also are problems. Banks, real estate agents, insurance companies, casinos, and law firms are the institutions most commonly used to launder money. Criminals in Zambia have used structuring, currency exchanges, monetary instruments, gaming, under-valuing assets, procurement fraud, and front companies to launder illicit proceeds. Other devices include securities, debit and credit cards, bulk cash smuggling, wire transfers, false currency declarations, and trade-based money laundering (TBML) via the purchase of luxury goods, such as vehicles and real estate, and abusive trade mis-invoicing of general trade goods.

Zambia is not considered an offshore financial center. The Government of the Republic of Zambia is developing a number of multi-facility economic zones that are similar to free trade zones.

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                          37

World Governance Indicator – Control of Corruption             34

The development of Zambia's business environment is hindered by corruption and a weak institutional framework. Companies encounter red tape and rampant bribery in all business operations, including company registration, obtaining a construction permit, setting up utilities, and paying taxes. As a result of the inefficient and corrupt judicial system, foreign investors' property rights are not accurately protected nor enforced. In addition, international trade is impeded by pervasive corruption and crime in Zambia's customs. Companies regularly pay kickbacks and bribes in the tendering process for government contracts. Zambia's Anti-Corruption Act prohibits corruption, extortion, bribery of a foreign public official, abuse of office and money laundering. Zambia's legislation does not address facilitation payments and the maximum allowable value of gifts or hospitality is not clearly regulated. Enforcement of Zambia's anti-corruption legislation is lacking. For further information - GAN Integrity Business Anti-Corruption Portal

Zambia is a landlocked country in southern Africa that shares a border with eight countries: Angola, Democratic Republic of the Congo, Tanzania, Malawi, Mozambique, Zimbabwe, Botswana, and Namibia. It has an estimated population of 19.6 million, GDP of $22.15 billion (2021) and GNI per capita of USD $1,030.

Zambia has faced financial and economic crises since 2020, when the country became the world’s first COVID-era default after Zambia missed a payment on $3 billion of outstanding Eurobonds. The Zambian economy contracted in 2020 by 3.0 percent and grew by a meager 1.0 percent in 2021. While 2021 growth recovered, the IMF forecast 2023 real GDP growth of only 4.1 percent remains dependent on Zambia receiving debt relief through the G20 Common Framework. Zambia’s debt overhang remains a severe inhibitor of economic growth, effectively eliminating the government’s access to international capital markets and forcing it to finance a persistent budget deficit through domestic borrowing, which crowds out private sector access to capital and limits growth.

Despite broad economic reforms and debt relief under the World Bank’s Highly Indebted Poor Countries (HIPC) initiative in the early 2000s, Zambia has generally struggled to meet its full economic potential. A decade of democratic and economic backsliding under former President Edgar Lungu and the Patriotic Front resulted in widespread corruption and economic rent-seeking that damaged Zambia’s reputation as an investment destination. Cumbersome administrative procedures and unpredictable legal and regulatory changes continue to inhibit Zambia’s immense potential for private sector investment, compounded by insufficient transparency in government contracting, ongoing lack of reliable electricity, and a high cost of doing business due to poor infrastructure, high cost of capital, and the lack of skilled labor.

President Hakainde Hichilema achieved a resounding victory at the polls in August 2021 on a platform of democratic and economic reform and renewal. By December 2021, Zambia achieved staff-level agreement with the IMF on a $1.4 billion Extended Credit Facility that has resulted in impressive progress on macroeconomic and fiscal reforms. The Hichilema administration has made significant strides reducing inflation, which has dropped from nearly 25.0 percent in July 2021 to 9.9 by the end of March 2023, despite Russia’s war of aggression against Ukraine. In 2022, the IMF board approved an Extended Credit Facility for Zambia, with the government adhering well to the policy prescriptions of the program. A successful businessman and investor in his own right, President Hichilema has pledged to tackle fiscal and regulatory reforms aimed at strengthening Zambia’s investment climate.

Zambia remains highly dependent on its mining and extractives industry, which accounts for 77% of exports and 39% of government revenue as of 2021, according to the Zambia Extractives Industries Transparency Initiative. It is Africa’s second-largest producer of copper and is an important source of several other critical minerals, including nickel and cobalt. The Hichilema administration in its maiden budget introduced a key reform to Zambia’s minerals tax policy (deductibility of mineral royalty taxes from corporate income tax payable) that is expected to attract new investment in the sector. The agriculture, healthcare, energy, financial services, and ICT sectors all offer potentially attractive opportunities for expanded U.S. trade and investment.

Country Links

Bank of Zambia​