Laos’s central bank starts checks on sanctions circumvention as the EU says grey-listing raises payment costs

Implications for lenders

Lenders in Laos may be checked on how they screen customers and payments against sanctions lists, so screening logs, escalation records and staff training are worth reviewing before the programme widens next year. Lenders that rely on foreign funding or payment partners may face longer due-diligence reviews while Laos remains under increased monitoring.

Implications

Facts

Inspections: according to Central Banking, the Bank of the Lao PDR (BOL) launched an inspection and supervision programme on 5 November 2026 to prevent financial institutions from being used to circumvent international restrictive measures, in line with Financial Action Task Force (FATF) recommendations of recent months. It starts with five lenders ¹ and is to cover all institutions under BOL supervision during next year. The BOL also pledged to work with foreign bodies on sanctions and transnational crime. The institutions in the first phase were not identified.

EU message: according to a summary of the EU Delegation’s release, at the second meeting of the Financial Sector Working Group of the Lao Business Forum in Vientiane on 4 November, the EU Ambassador to Laos said that, because Laos is under FATF increased monitoring, many European banks treat transactions involving Laos as high-risk and apply enhanced due diligence. He said the remaining items of the FATF action plan still need to be completed. Participants are to submit position papers by mid-December, ahead of consultations with the central bank before the next Lao Business Forum in early 2027.

Analysis

Cross-country: Laos has been on the FATF increased-monitoring list since 21 February 2025. Vietnam is also on that list, and the FATF warned it in October that it would consider next steps; Myanmar remains on the call-for-action list, while Cambodia and Thailand are on neither list. An IMF study across countries estimated that grey-listing cuts capital inflows by an average of 7.6% of GDP ²; the estimate is not specific to Laos, but it shows why correspondent-bank treatment matters for a small, import-dependent economy.

Supervision: the BOL programme moves sanctions screening from a policy commitment to on-site checks. For banks and deposit-taking microfinance institutions, the practical test is whether screening of customers and payments, and records of it, will satisfy examiners while the remaining action-plan items are completed.

Counterpoints and uncertainties

The BOL statement is reported by Central Banking and the EU remarks come from a summary of the EU Delegation’s release; the inspection criteria and possible penalties have not been published. Exiting the grey list depends on completing the action plan, an FATF on-site visit and a plenary decision, and further inspections could also find gaps that delay it.