ETHIOPIA
Summary

Sanctions

None

FAFT AML Deficient

Yes

Higher Risk Areas

 

Non - Compliance with FATF 40 + 9 Recommendations

Not on EU White list equivalent jurisdictions

Corruption Index (Transparency International & W.G.I.)

World Governance Indicators (Average Score)

Failed States Index (Political Issues)(Average Score)

 

 

ANTI-MONEY LAUNDERING

 

FATF Status

Ethiopia is on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Latest FATF Statement  -  27 June 2014 

Since June 2010, when Ethiopia made high-level political commitment to work with the FATF to address its strategic AML/CFT deficiencies, Ethiopia has made significant progress to improve its AML/CFT regime. Ethiopia has substantially addressed its action plan, including by: adequately criminalising money laundering and terrorist financing; establishing a legal framework and procedures to identify and freeze terrorist assets; ensuring a fully operational and effectively functioning financial intelligence unit; improving customer due diligence measures; raising awareness of AML/CFT issues within the law enforcement community; and establishing a AML/CFT supervisory framework. The FATF will conduct an on-site visit to confirm that the process of implementing the required reforms and actions is underway to address deficiencies previously identified by the FATF.

 

Compliance with FATF Recommendations 

Ethiopia has not yet undertaken a Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards.

 

US Department of State Money Laundering assessment (INCSR) 

Ethiopia was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2014 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

 

Due primarily to its unsophisticated financial system and pervasive government controls, Ethiopia is not considered to be a regional financial center. Ethiopia’s location within the Horn of Africa makes it vulnerable to money laundering-related activities perpetrated by transnational criminal organizations, terrorists, and narcotics trafficking organizations. Corruption, smuggling, and trafficking in narcotics, persons, arms, and animal products are the key proceeds-generating crimes. As the economy grows and becomes more open, Ethiopian law enforcement sources believe bank fraud, electronic/computer crime, and money laundering activities could continue to rise. The financial services sector remains closed to foreign investment.

High tariffs encourage customs fraud and trade-based money laundering. Since strict foreign exchange controls limit the possession of foreign currency, most of the proceeds of contraband smuggling and other crimes are not laundered through the official banking system, composed of three public banks and fourteen private banks. Law enforcement sources indicate money and value transfer systems, particularly hawala, are widely used. The Ethiopian government attempts to monitor informal value transfer networks within the country and has closed a number of illegal hawala operations.

In June 2011, the FATF began to include Ethiopia in its Public Statement for Ethiopia’s lack of sufficient progress in addressing longstanding AML/CFT deficiencies. Most recently, the FATF again included Ethiopia in its October 18, 2013 Public Statement for its continuing lack of adequate progress. The noted deficiencies include inadequate customer due diligence measures and the lack of an adequate legal framework and procedures to identify and freeze terrorist assets. The FATF has called upon its members to consider the risks arising from these deficiencies.

 

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SANCTIONS

There are no international sanctions currently in force against this country.

 

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BRIBERY & CORRUPTION

 

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

33

World Governance Indicator – Control of Corruption

32

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

Ethiopia is one of the fastest-growing economies in the world. It has registered impressive GDP growth for several years, ranging between 6% and 12%, depending on source data. The World Bank and IMF forecast continued average growth of 7% over the next three years. With a population of roughly 90 million, Ethiopia is the second most populous country in sub-Saharan Africa, after Nigeria.

The government of Ethiopia follows an integrated 5-year development plan, the Growth and Transformation Plan (GTP), which aims to achieve 11.2 – 14.9% GDP growth annually as well as achieve the Millennium Development Goals and attain middle-class income status by 2025. To achieve these goals, the government is investing heavily in large-scale social, infrastructural and energy projects.

While these developments are positive indicators for future private sector development, it translates into the flow of significant amounts of capital into public sector projects. World Bank estimates show that infrastructure spending requires approximately 19% of Ethiopia’s total GDP in fiscal year 2011 – 2012.

Competitive labor and energy costs as well as the budding consumer markets are key pulls for foreign direct investment. Current challenges to the private sector include foreign exchange shortages and limited access to finance capital, long lead-times for inputs and exports due to the current logistic infrastructure, and bureaucratic delays. Areas closed to foreign investment are banking, retail, tele-communications and transportation. Businesses interested in entering the market should focus on aligning operations to complement the overall goals of the GTP. Key growth sectors include renewable energy, construction, tourism, textile and leather products, tele-communication support services and products, and aviation support services and products.

The government of Ethiopia is currently working on World Trade Organization ascension with the goal of attaining least developed country status by 2015. It is actively pursuing improving the current investment climate through adopting more efficient bureaucratic processes in the areas of registration, logistic, and tax processes. Key energy generation and distribution projects as well as transportation infrastructure projects are scheduled for completion by the end of 2015.

 

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FURTHER REPORTS

6 November 2012  -  Extract from IMF Report: The Federal Democratic Republic of Ethiopia: 2012 Article IV Consultation—

" Ethiopia has yet to bring its anti-money laundering/combating the financing of terrorism (AML/CFT) regime into line with international standards. Since June 2011, Ethiopia has been listed by the Financial Action Task Force (FATF) among the jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing them. If not improved, heightened due diligence may impede access to global financial markets. The World Bank has been discussing a technical assistance program with the authorities to address remaining issues, with a plan to conduct an assessment of the AML/CFT framework in the first quarter of 2013."

Read Full Report (pdf file)

 

 

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