Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015 1

Anti-money laundering and counter-terrorist financing (AML/CTF) measures in Ethiopia Mutual Evaluation

Key findings, ratings and priority actions May 2015 www.fatf-gafi.org/topics/mutualevaluations/documents/mer-ethiopia-2015.html

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015 2

This assessment was conducted by the WORLD BANK GROUP approved by the ESAAMLG plenary

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Key findings

Ethiopia’s AML/CFT efforts are recent, but the legal AML/CFT framework is generally solid.

It is highly unlikely that Ethiopia’s financial sector would be widely used to launder funds, taking into account the lack of integration of the financial sector, regionally and globally. However, Ethiopia is located in a highly volatile region with active terrorist groups.

Ethiopia needs to complete its national money laundering / terrorist financing risk assessment and adopt a comprehensive action plan based on that assessment

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Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Key findings

Ethiopia should address the illegal provision of money value transfer services through regulatory enforcement .

Additional training on more effective uses of the money laundering offence among relevant agencies and the private sector may lead to greater detection and investigation of proceeds from criminal conduct

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Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Key findings

A very high percentage of Ethiopia’s population is without access to financial services, resulting in high volumes of cash transactions taking place which are unrecorded and untraceable. Government efforts to promote financial inclusion need to be closely coordinated with the ML/TF designated agencies to ensure that ML/TF risks associated with financial exclusion are properly managed.

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Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Key findings

Possibly due to the recent introduction of AML/CFT measures: many relevant officials do not yet have the necessary knowledge and expertise. More training and capacity building is required.

The Financial Intelligence Centre is understaffed and has taken on tasks beyond the core financial intelligence unit tasks, specifically the supervision of reporting entities AML/CFT obligations.

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Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Ratings – Effectiveness (1/3)

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Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF)

Extent to which Ethiopia has achieved this objective

1. ML and TF risks are understood and, where appropriate, actions co-ordinated domestically to combat ML and TF

Low

2. International co-operation delivers appropriate information, financial intelligence, and evidence, and facilitates action against criminals and their assets

Moderate

3. Supervisors appropriately supervise, monitor and regulate financial institutions and designated non-financial businesses and professions (DNFBPs) for compliance with AML/CFT requirements commensurate with their risks.

Low

4. Financial institutions and DNFBPs adequately apply AML/CFT preventive measures commensurate with their risks, and report suspicious transactions.

Low

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Ratings – Effectiveness (2/3)

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Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF)

Extent to which Ethiopia has achieved this objective

5. Legal persons and arrangements are prevented from misuse for money laundering or terrorist financing, and information on their beneficial ownership is available to competent authorities without impediments

Moderate

6. Financial intelligence and all other relevant information are appropriately used by competent authorities for money laundering and terrorist financing investigations.

Low

7. Money laundering offences and activities are investigated and offenders are prosecuted and subject to effective, proportionate and dissuasive sanctions

Low

8. Proceeds and instrumentalities of crime are confiscated. Low

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Ratings – Effectiveness (3/3)

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Immediate outcome of an effective system to combat money laundering (ML) and terrorist financing (TF)

Extent to which Ethiopia has achieved this objective

9. Terrorist financing offences and activities are investigated and persons who finance terrorism are prosecuted and subject to effective, proportionate and dissuasive sanctions.

Low

10. Terrorists, terrorist organisations and terrorist financiers are prevented from raising, moving and using funds, and from abusing the non-profit sector.

Low

11. Persons and entities involved in the proliferation of weapons of mass destruction are prevented from raising, moving and using funds, consistent with the relevant United Nations Security Council Resolutions.

Low

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

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HighSubstantialModerateLow

Ratings – Effectiveness

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Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Ratings – technical compliance (1/5)

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AML/CFT POLICIES AND COORDINATION 1. Assessing risks & applying a risk-based approach Non-compliant

2. National cooperation and coordination Partially compliant

MONEY LAUNDERING AND CONFISCATION

3. Money laundering offence Largely compliant

4. Confiscation and provisional measures Largely compliant

TERRORIST FINANCING AND FINANCING OF PROLIFERATION

5. Terrorist financing offence Largely compliant

6. Targeted financial sanctions related to terrorism & terrorist financing Non-compliant

7. Targeted financial sanctions related to proliferation Non-compliant

8. Non-profit organisations Partially compliant

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Ratings – technical compliance (2/5)

10-Jun-15 12

PREVENTIVE MEASURES 9. Financial institution secrecy laws Compliant

Customer due diligence and record keeping

10. Customer due diligence Largely compliant

11. Record keeping Compliant

Additional measures for specific customers and activities

12. Politically exposed persons Compliant

13. Correspondent banking Compliant

14. Money or value transfer services Partially compliant

15. New technologies Largely compliant

16. Wire transfers Compliant

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Ratings – technical compliance (3/5)

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PREVENTIVE MEASURES (continued) Reliance, Controls and Financial Groups

17. Reliance on third parties Compliant

18. Internal controls and foreign branches and subsidiaries Largely compliant

19. Higher-risk countries Partially compliant

Reporting of suspicious transactions

20. Reporting of suspicious transactions Compliant

21. Tipping-off and confidentiality Largely compliant

Designated non-financial Businesses and Professions (DNFBPs)

22. DNFBPs: Customer due diligence Largely compliant

23. DNFBPs: Other measures Largely compliant

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015 10-Jun-15 14

TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS 24. Transparency and beneficial ownership of legal persons Partially compliant

25. Transparency and beneficial ownership of legal arrangements Not applicable

POWERS AND RESPONSIBILITIES OF COMPETENT AUTHORITIES AND OTHER INSTITUTIONAL MEASURES

Regulation and Supervision

26. Regulation and supervision of financial institutions Largely compliant

27. Powers of supervisors Compliant

28. Regulation and supervision of DNFBPs Partially compliant

Operational and Law Enforcement

29. Financial intelligence units Largely compliant

30. Responsibilities of law enforcement and investigative authorities Largely compliant

31. Powers of law enforcement and investigative authorities Largely compliant

32. Cash couriers Partially compliant

Ratings – technical compliance (4/5)

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015 10-Jun-15 15

TRANSPARENCY AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS AND ARRANGEMENTS (continued)

General Requirements

33. Statistics Partially compliant

34. Guidance and feedback Partially compliant

Sanctions

35. Sanctions Largely compliant

INTERNATIONAL COOPERATION

36. International instruments Partially compliant

37. Mutual legal assistance Largely compliant

38. Mutual legal assistance: freezing and confiscation Largely compliant

39. Extradition Largely compliant

40. Other forms of international cooperation Non-compliant

Ratings – technical compliance (5/5)

Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

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CompliantLargely compliantPartially compliantNon-compliantNot applicable

Ratings – technical compliance

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Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Priority Actions for Ethiopia to strengthen its AML/CFT System

Completion of the National Risk Assessment process

Broadening and reorientation of: – suspicious transaction reporting, – analysis and money laundering investigations, – prosecutions and asset freezing and confiscation towards the most significant sources of illicit proceeds and

identification of the most common money laundering methods/techniques

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Anti-money laundering and counter-terrorist financing measures in Ethiopia – Mutual Evaluation Report – May 2015

Priority Actions for Ethiopia to strengthen its AML/CFT System

Provide further training and awareness raising for government officials and reporting entities

Expand financial services to the unbanked and those without access to financial services

Provide more resources / staff to the Financial Intelligence Centre

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