BY BACHA ZEWDIE
Curbing money laundering and financing of terrorism needs an integrated effort as such crimes are very complex in their nature and a network of people participate in it, Mulugeta Temesgen, Supervision Team Leader at the Ethiopian Financial Intelligence Center (EFIC) said.
Mulugeta told The Ethiopian Herald that money laundering is a global and white collars’ crime committed to giving legal shelter to the money obtained via criminal activities. The criminals use various methods to conceal the money. To conceal the illegally earned money, one may deposit it in a financial institution or purchase expensive goods.
He/she might also use layering which means concealing the source of the money through a series of transactions and bookkeeping tricks. The third method is investing the money in building and other investment activities.
“The practice severely harms the government’s income, increases criminal activities in society, and destabilizes the economy by injecting illegal finance.
It also decreases the inflow of remittance and foreign direct investment. If left unchecked, it might end up creating a weak government as mafia groups would have greater influence in the overall activities of society,” he said.
The magnitude of the harm this crime places on the global economy is immense as its financial flow takes up to two percent of global GDP. Similarly, Ethiopia also loses a great amount of money every year via money laundering.
Among the major actions to be taken to tackle this crime, as to Mulugeta, is enacting legal framework and building strong institutions.
To this end, Ethiopia has signed and endorsed various international conventions that allow the seizure and confiscation of assets obtained through money laundering. They also facilitate means to bring the perpetrators before the court of law.
Following the reform at the national level, various efforts have been undertaken to build the capacity of EFIC in terms of human and financial capital. The capacity building efforts also aim at strengthening collaboration with stakeholders to combat Money Laundering and Financing Terrorism (ML/FT).
The work undertaken so far has helped the country to be removed from countries that are in the blacklist for having high money laundering practices and not being cooperative in the global fight, Mulugeta said.
Biniam Shiferaw, Consultant and Legal Advisor on Anti Money Laundering and Countering Financing of Terrorism (AML/CFT) on his part said though it is difficult to have any reliable data on how much money is laundered in Ethiopia, the extent is high.
“To say so, there are some indications we have found in the country’s first national risk assessment. Some of the major crimes like human trafficking, corruption, tax evasion, money order, usury and contraband have been the main sources of money laundering.”
According to Biniam, it is difficult to simply find out the magnitude of the crime or say this amount of money is laundered as it is a clandestine activity by its nature.
As it is white collars’ crime money, laundering is better advanced than traditional crimes. This is because, it is committed by more advanced individuals including government officials and investors, both foreign and local, with their suit, briefcase or using their respected name as well as their reputation among the community. They use various methods and techniques depending on the context.
It may also involve different countries and institutions which make its investigation and prosecution very difficult. Unless the country’s legal framework is strong enough to prevent this crime, even corrupted individuals may use investors to launder their money making it appear as if it is obtained through a legitimate activity. They then go back to their country and claim that they earned the money from the business they run in Ethiopia, Biniam said.
Biniam said: “Many entities are involved in the reporting and checking whether a particular cash or financial transaction is laundered or not. Stakeholders in the financial intelligence sector, commercial banks, real estate dealers, dealers of precious metals and stones, lawyers, accountants and agents play a pivotal role in the prevention of money laundering.”
Biniam further said that for the purpose of further investigation and prosecution, law enforcement entities such Federal Police Investigation Bureau and Federal Attorney General Office are also involved. Above all, Ethiopia’s legal framework, despite some gaps, is good enough to prevent the crime as it is based on international standards and 40 Financial Action Taskforce recommendations.
“The essential result expected from reporting, investigation and prosecution of money laundering crime and financing of terrorism is to obtaining a lesson for the future. To this end, finance and related assets gains via money laundering must be seized, frozen and confiscated to apply the principle ‘crime should not pay’. If a crime should not pay, then, the perpetrators should be deprived of the illegitimate right to the wealth gained illegally,” Biniam added.
In order to fill the gap in empowering the law enforcement organs and fully-fledged application of the legal framework, the government must increase its commitment in managing the issue. Moreover, the whole public including the law enforcement bodies must be well aware of the wealth the country loses every year via financial crimes, Biniam stressed.
Recently, AML/CFT Capacity Support Project, in collaboration with Financial Intelligence Center, has provided a two days awareness creation training for communication units and media practitioners on international and regional mechanisms to curb money laundering and the financing of terrorism.
On the training, Abby Dinka, international relations expert at FIC has presented a paper. While addressing mechanisms to curb money laundering and the financing of terrorism in Ethiopia and practical challenges, she said that financial intelligence center receives reports from financial institutions like banks, microfinance and insurance sector. In addition, it receives reports from designated non-financial business and professions such as lawyers, accountants and real estate sector.
The center basically receives two types of reports; the first is suspicious transaction report that banks, microfinance institutions and other aforementioned sectors send to the center when they suspect their client may have any relation with money laundering and financing of terrorism. For instance, a client used to deposit around Birr 10,000 every month increases his deposit to Birr 100,000 at once, this can be a source of suspicion.
As per this, FIC has received 1524 suspicious transaction during the past July – September 2019 from financial institutions and obtained 362 suspicious transactions through its own supervision, Abby said.
In addition, according to Abby, the center has received about 8 suspicious transactions from informants, individuals and different sects of the community, who believe the issue of money laundering and financing of terrorism crime concerns them. It also received about 50 suspicions from the Custom Commission; altogether, the center has received about 1,944 suspicious reports during the period mentioned above.
The second type of report, as of Abby, is a cash transaction report. This type of transactions can be reported in a single or cumulated form when the transaction exceeds 15,000 USD. After receiving the reports, though it is not an investigative organ, the center conducts analysis on the reports and disseminates to law enforcement organs such as Federal Police, Attorney General and National Intelligence Security Service (NISS) as an initial input to further investigation and prosecution. Out of the reports handed over to the concerned bodies, 56 cases suspected to have criminal involvement have been investigated.
The center also conducts strategic analysis on the origin, performance and nature of the crimes. Until now, it has conducted analysis on the illegal money order, usury and technology-related financial transaction crimes like bitcoin. Based on the analysis, the center provides recommendations, Abby said.
Moreover, as a result of its comprehensive statistical data, the center serves as a financial database for the law enforcement entities such as police, attorney general and others for further investigation and prosecution, she added.
The Ethiopian Herald February 7/2021
