Financial Crime World

Syria’s Financial Sector: Persistent Challenges Amid Conflict and Money Laundering Concerns

FATF’s Ongoing Concerns with Syria’s AML/CFT Compliance

  • Syria’s strategic anti-money laundering and counter-terrorist financing (AML/CFT) deficiencies were reaffirmed by the Financial Action Task Force (FATF) on February 23, 2024.
  • Syria has been on the FATF’s watchlist since 2010.

Syria’s Evaluation by FATF

  • Syria committed to working with the FATF and MENAFATF to enhance its AML/CFT framework.
  • The FATF identified that Syria had substantially addressed the core elements of its action plan at a technical level in 2014.
  • However, security situation issues have prevented an on-site visit to assess reform implementation.

Compliance Challenges and Previous Evaluations

  • In 2006, the FATF Mutual Evaluation Report classified Syria as Compliant for five and Largely Compliant for eight of the FATF 40 + 9 Recommendations.
  • Syria was deemed Partially Compliant or Non-Compliant for five of the six Core Recommendations.

US Department of State’s Assessment of Syria’s Money Laundering and Terrorist Financing Concerns

  • The Syrian civil war has reduced the population using formal banking services and increased cash transactions.
  • Significant money laundering and terrorist financing vulnerabilities remain due to the corrupt and illicit activities of Syria’s political and business elite.

Border Weaknesses and Hawala Networks

  • Syria’s porous borders, lack of control and oversight, and absence of necessary legislation contribute to significant money laundering and terrorist financing vulnerabilities.
  • Estimates suggest that Syrian money changers conduct between $15 to $70 million in black market transactions daily.

Human Trafficking and Illicit Businesses

  • Human trafficking, human smuggling, and document trafficking add to the enormous sums of money involved in criminal activities.
  • Criminal gangs place the proceeds from these crimes into financial institutions in the European Union and Turkey.

Sanctions and Financial Restrictions

  • The US has imposed various sanctions against Syria since 1979.
  • Syria’s membership in the Arab League was suspended, leading to additional sanctions.

Evolving Free Trade Zones

  • Syria currently hosts eight free trade zones, attracting significant trade volumes.
  • Reports indicate some individuals use these zones to illegally import arms and other restricted goods.

The Future of Syria’s Financial Sector

  • Syria’s financial sector faces ongoing instability, money laundering concerns, and international sanctions.
  • Continued global attention and collaboration are necessary to enhance transparency, address vulnerabilities, and promote a stable and compliant financial environment.