FATF AML Deficiency List
Non - Compliance with FATF MER Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
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 2019 . According to that Evaluation, Zambia was deemed Compliant for 11 and Largely Compliant for 17 of the FATF 40 Recommendations. It was also deemed 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.
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 28
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 has had one of the world’s fastest growing economies for the past ten years, with real GDP growth averaging roughly 6.7% per annum, though growth slowed in 2015 to just over 3%, due to falling copper prices, reduced power generation, and depreciation of the kwacha. Zambia’s lack of economic diversification and dependency on copper as its sole major export makes it vulnerable to fluctuations in the world commodities market and prices turned downward in 2015 due to declining demand from China; Zambia was overtaken by the Democratic Republic of Congo as Africa’s largest copper producer.
Despite recent strong economic growth and its status as a lower middle-income country, widespread and extreme rural poverty and high unemployment levels remain significant problems, made worse by a high birth rate, a relatively high HIV/AIDS burden, and by market-distorting agricultural and energy policies. Economic policy inconsistency and poor budget execution in recent years has hindered the economy and contributed to weakness in the kwacha, which was Africa’s worst performing currency during 2015. Zambia has raised $7 billion from international investors by issuing separate sovereign bonds in September 2012, April 2014, and July 2015, significantly increasing the country’s public debt as a share of GDP.
Poor management of water resources has also contributed to a power generation shortage, which has hampered industrial productivity and contributed to an increase in year-on-year inflation to 23% by March 2016. Zambia’s currency, the kwacha, also depreciated sharply against the dollar through 2015, before the central bank restricted lending.
Agriculture - products:
corn, sorghum, rice, peanuts, sunflower seeds, vegetables, flowers, tobacco, cotton, sugarcane, cassava (manioc, tapioca), coffee; cattle, goats, pigs, poultry, milk, eggs, hides
copper mining and processing, emerald mining, construction, foodstuffs, beverages, chemicals, textiles, fertilizer, horticulture
Exports - commodities:
copper/cobalt, cobalt, electricity; tobacco, flowers, cotton
Exports - partners:
China 25.5%, Democratic Republic of the Congo 13%, South Africa 6.4%, South Korea 4.9%, India 4.3% (2015)
Imports - commodities:
machinery, transportation equipment, petroleum products, electricity, fertilizer, foodstuffs, clothing
Imports - partners:
South Africa 34.5%, Democratic Republic of the Congo 18.2%, Kenya 9.7%, China 7.3%, India 4.4% (2015)
Investment Climate - US State Department
Zambia is a landlocked state located in southern Africa. Today, it is faced with the challenges of diversifying its economy, which is 70 percent dependent on copper exports, and accelerating private sector-led growth to address the poverty of its people. For more than a decade, driven by high commodity prices, economic growth averaged more than 7 percent. However, rampant government spending, widespread borrowing, corruption, and inconsistent economic policies left the economy especially vulnerable to external shocks such as instability in copper prices and poor electricity generation. As a consequence, economic growth for 2016 is forecast to be less than 4 percent.
With the slowing of bilateral and multilateral financing due to austerity measures in developed economies and the World Bank’s reclassification of Zambia as a lower middle income country, financiers have not provided as many concessional loans to Zambia as previously. The Government of the Republic of Zambia (GRZ) instead has borrowed both on the international market through three successive Eurobonds and through contracts with foreign companies to conduct short-term development projects. The government spoke of fiscal consolidation in 2015 and of its intent to restrain spending and reduce borrowing, but has not yet taken concrete steps to do so.
The investment environment is still generally conducive to U.S. investment. However, the United States has a relatively small commercial presence in Zambia. Foreign direct investment remains dominated by large mining investments from Canada, Australia, the UK, and China, in addition to infrastructure and other projects performed almost entirely by Chinese companies. While the GRZ has made some improvements to the business environment over the past decade, cumbersome administrative procedures, instability and unpredictability of laws, the high cost of doing business due to poor infrastructure, the high cost of finance and inadequate human resources remain concerns. Despite these issues, foreign investment interest continues to be high, which should translate into growth in a number of economic sectors beyond mining, such as tourism, power generation and agriculture, particularly if the government decides to reduce or eliminate market-distorting subsidies and implement more consistent, market-friendly policies.
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