BY TSEGAYE TILAHUN
To combat money laundering and illicit financial flows, Ethiopia has been undertaking various decisive measures. Changing of its currency notes, applying bank transaction limits, registering assets of individuals, commencement of African Continental Free Trade Area (AfCFTA) trade are among others.
The effort needs the political commitment of the government to address the challenges of money laundering and illicit financial flows. Countering money laundering is of critical importance not only to secure economic growth but also to combat transnational crime.
The recent measures by the government will help the country comply with the recommendations of the international Financial Action Task Force (FATF). Earlier, the Task Force has recommended Ethiopia to increase its focus on detecting and investigating illicit financial flows, assets recovery, improving technological solutions, increasing human capacity and enhancing regional cooperation and coordination.
The Federal Documents and Authentication and Registration Agency in September announced that to prevent money laundering, it will no longer authenticate property deals made using cash payment.
People can only authenticate selling and buying of properties if only the parties made the transaction through the formal banking system. The two parties have to be able to present bank transfer and deposit confirmation to the Agency.
In addition, the agency also indicated that any loan between two parties must be supported with bank receipts as of September 17 in order to be authenticated.
The Agency’s decision to ban cash payment in movable and immovable property deals, has followed introduction of new currency notes to combat organized crimes and contraband trading, money laundering and printing of forged currencies.
In Ethiopia, most of the transactions are being made using cash though in recent years the government has been trying to create a cashless society introducing mobile money and internet banking.
According to the Customs Commission, report over the past few years shows that illegal trading across borders and circulation of hard currencies by organized criminals have been increasing. The Commission has been capturing hard currency, guns and contraband goods from the organized criminals, mainly along the borders.
As a result, the country has made great progress combating illegal trade and circulation of hard currencies. Recently, The Minister of Peace Muferihat Kamil said that as we continue to make progress with restructuring of our security agencies, we place significant expectations on financial intelligence capabilities to support the promotion and expansion of the formal economy, discouragement of illicit financial transaction and the disruption of terrorist financing in Ethiopia and across the region.
According to documents, money laundering is posing a significant danger to the developmental and security efforts of the world. Being a principally informal and cash-based economy, Ethiopia is exposed to terrorism and money laundering activities.
Realizing the effects, Ethiopia’s government had enacted a legal framework, established the Financial Intelligence Centre to oversee the terrorist financing, money laundering and other related matters to fight such acts including directing financial institutions to implement customer due diligence.
To study Global Financial Intelligence, about 26 billion dollars left the country unlawfully between 2004 and 2013. The same reports discovered that Ethiopia loses two billion dollars annually due to illicit financial flows.
Inability to undertake an integrated system to prevent money laundering in Ethiopia will ruin not only the national economy but also the country’s foreign investment and financial interactions at global level, according to the Financial Intelligence Center.
Approached by ENA Experts from the financial intelligence center stressed that prevention of illegal money transfer is not an issue to be left only for certain institutions; it is rather the responsibility of all citizens in the nation.
Monitoring and Assessment Team Leader at the Center, Mulugeta Temesgen said that despite all the losses at the national level, the trend will also affect the country`s foreign investment as well as loan and aid related interactions with international financial institutions.
“If we fail to monitor and prevent such crimes with strong mechanisms, our financial institutions will not be able to properly work with their counterparts in other countries.”
Such crimes will also affect Foreign Direct Investments (FDI) of the country as it discourages foreign investors, he said.
The prevalence of money laundering also affects loan and aid related issues with the International Monetary Fund (IMF) and the World Bank, Mulugeta stated.
Based on the evaluation from the International Financial Monitoring Task-force on the legal frameworks and its execution on the country`s financial intelligence, integrated prevention mechanism is critical to avert the threat of money laundering, he pointed out.
According to the evaluation of the task-force, Ethiopia’s legal frameworks and its implementation in terms of financial intelligence had been in a critical situation.
Though currently the nation has been registering improvements in this regard, there is still a possibility to be back to that blacklist. “So, our efforts to tackle the challenges of money laundering should consider the global situation apart from the national benefit,” Mulugeta underscored.
Financial Crimes Analysis Team Leader, Gebeyehu Gudeta said for his part that the center was not established to function properly and implement its real mission but just to fulfill the international requirements.
Despite its decisive role for the development of the country, there had been unlawful interference and pressures by the former leadership that had hindered it to realizing its objectives, he said.
“In addition to viewing things on political affiliation, lack of human resources and budget had been some of the predicament caused by the former leadership of the center. There had been no adequate resources, materials and technologies among other things to execute all the targets,” he elaborated.
However, currently efforts are being made to strengthen the center in a bid to properly fight money laundering in collaboration with pertinent stakeholders. Illicit financial trade flows have become a serious challenge and obstacle for the country’s development.
The role of domestic and international stakeholders to prevent illegal activity is vital. There has been a lack of strategic support to put an end to money laundering.
According to Global Financial Integrity (GFI), about 1.3 to 3.2 billion USD million has left Ethiopia between 2005 and 2014 every year, which is equivalent to 11 percent to 29 percent of the country’s total trade.
Similarly, an estimated 88.6 USD billion, equivalent to 3.7 percent of Africa’s GDP, leaves the continent annually as an illicit capital flight, UNCTAD’s Economic Development in Africa Report 2020 stated.
The recent currency note change is believed as an important step to transform cash based economy. It would enable it to recover cash and allocate it in the productive economic sector since the Ethiopian economy is still cash-based and there is a huge amount of money out of banks.
The Ethiopian Herald January 6/2021
