Jordan’s Financial Sector: A Thriving Market with Challenges
Amman, Jordan - The Hashemite Kingdom of Jordan has a vibrant financial sector, comprising 17.6 thousand regulated institutions and non-profit organizations, alongside approximately 195 thousand legal entities.
Primary Components
The primary component of the financial sector is banks, which account for 93.4% of total assets. Despite their relatively small asset ratio of 0.3%, the money exchange sector plays a vital role in facilitating transactions. In 2018, the sector facilitated approximately JD 10.2 billion in transfers, with outgoing and incoming transfers amounting to JD 4.5 billion and JD 5.7 billion, respectively.
Non-Financial Sector
The non-financial sector is also significant, comprising designated businesses such as:
- Real estate offices
- Jewelry shops
- Lawyers
- Accountants
In 2018, the real estate market saw a trading volume of around JD 5 billion, with JD 4 billion accounting for 14% of GDP. Meanwhile, jewelry shops recorded total assets of JD 128 million, with sales amounting to JD 33.6 million.
Money Laundering Risks
However, the financial sector is not immune to money laundering risks. According to a recent assessment, Jordan faces a “high” level of national money laundering risks, with a country risk score of 4.1 out of 7.0.
The report highlights that domestic proceeds from predicate crimes are a significant threat, estimated at JD 941 million or approximately 3.7% of GDP. Tax evasion is the primary contributor, accounting for 93% of domestic proceeds, followed by:
- Robbery/criminal theft
- Theft
- Trafficking in illicit drugs
- Corruption
- Bribery
Tax evasion alone generated an estimated JD 695 million in criminal proceeds, with most proceeds generated in cash or financial assets. Jewelry shops and real estate offices are also vulnerable to money laundering threats, as they often handle large amounts of cash and transactions.
Recommendations
The report emphasizes the need for robust Anti-Money Laundering (AML) measures to combat these risks and protect Jordan’s financial sector from illegal activities.
By understanding the threats faced by sectors and firms related to the AML system, Jordan can take proactive steps to mitigate money laundering risks and maintain a healthy financial sector.