Abebe A D A N E Desta | Debre Tabor University (original) (raw)
Lecturer of Laws at Debre Tabor University
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Money laundering is a process of integrating criminal money with legal business or wealth to conc... more Money laundering is a process of integrating criminal money with legal business or wealth to conceal its true origin. The crime of money laundering is a serious problem that deprives the country of a large
number of funds that should go to public goods and services. To prevent the crime of money laundering, banks must implement several techniques that aim to verify the identity of their clients and the source of wealth. The research uncovered that the anti-money laundering laws and the practice of banks are lax and lag behind the international minimum standards and recommendations. Specifically, the KYC requirement for natural persons is obsolete and vulnerable to identity fraud. The same requirement
for legal persons contains permissive phrases in contradistinction to the international recommendations. Besides, the requirements of the anti-money laundering laws on PEPs are not practically implemented.
There is no also legal or practical procedure to oust launderers from the bidding process of SOEs in the country. Though the existing anti-money laundering legislations demand reporting suspicious and
cash transaction reports to the FIC, practically banks are only complying with cash transaction reports.
CTRs serve a little purpose to avoid launderers because individuals can withdraw their money by transferring their money to two or more persons without touching the threshold. Furthermore, the country does not have a separate responsible committee that designates terrorists and there is no
procedure for the application and delisting of terrorists in the anti-money laundering legislation. There is also no law that demands freezing without delay of terrorists‟ assets. The freezing and confiscation of
terrorists‟ asset regulation failed to have an exception that guarantees the interest of third parties in good faith. In addition, though the country established the Financial Intelligence Centre (FIC) to fight
money laundering and financing of terrorism, the FIC is financially weak and poorly staffed to undertake its duties properly. Even worse, the FIC is made accountable to the Prime Minister which deprives its independence. The powers and responsibilities of the NBE and FIC are not clearly demarcated. The supervisory and regulatory power of the FIC is transferred to the NBE through a letter. To resolve such
problems the research finally recommends the need of demanding additional documents to verify the true identity of natural persons in their transactions with banks. Permissive phrases in the KYC requirements
of legal persons should be replaced with mandatory terms. Concerning PEPs, the FIC should come up with the list of PEPs and disseminate the list to banks to apply enhanced due diligence. To resolve the
danger of selling SOEs to launderers the FIC and the Privatization Agency should work jointly to identify the source of wealth of potential bidders. Banks shall diligently apply suspicious transactions to prevent
launderers. There should also be a cash transaction restriction at least in the cities to avoid the dangers of money laundering. There should be a separate committee to designate terrorists and clear procedures
of application and delisting should be introduced. The current freezing of terrorists‟ assets law shall recognize freezing „without delay‟ and the interest of innocent third parties should also be considered in the process. The FIC should be strengthened both financially and in human resources to undertake its duties. It should be accountable to the parliament. Finally, the relationship between NBE and FIC should be legally demarcated to avoid potential conflict and overlapping of power.
Money laundering is a process of integrating criminal money with legal business or wealth to conc... more Money laundering is a process of integrating criminal money with legal business or wealth to conceal its true origin. The crime of money laundering is a serious problem that deprives the country of a large
number of funds that should go to public goods and services. To prevent the crime of money laundering, banks must implement several techniques that aim to verify the identity of their clients and the source of wealth. The research uncovered that the anti-money laundering laws and the practice of banks are lax and lag behind the international minimum standards and recommendations. Specifically, the KYC requirement for natural persons is obsolete and vulnerable to identity fraud. The same requirement
for legal persons contains permissive phrases in contradistinction to the international recommendations. Besides, the requirements of the anti-money laundering laws on PEPs are not practically implemented.
There is no also legal or practical procedure to oust launderers from the bidding process of SOEs in the country. Though the existing anti-money laundering legislations demand reporting suspicious and
cash transaction reports to the FIC, practically banks are only complying with cash transaction reports.
CTRs serve a little purpose to avoid launderers because individuals can withdraw their money by transferring their money to two or more persons without touching the threshold. Furthermore, the country does not have a separate responsible committee that designates terrorists and there is no
procedure for the application and delisting of terrorists in the anti-money laundering legislation. There is also no law that demands freezing without delay of terrorists‟ assets. The freezing and confiscation of
terrorists‟ asset regulation failed to have an exception that guarantees the interest of third parties in good faith. In addition, though the country established the Financial Intelligence Centre (FIC) to fight
money laundering and financing of terrorism, the FIC is financially weak and poorly staffed to undertake its duties properly. Even worse, the FIC is made accountable to the Prime Minister which deprives its independence. The powers and responsibilities of the NBE and FIC are not clearly demarcated. The supervisory and regulatory power of the FIC is transferred to the NBE through a letter. To resolve such
problems the research finally recommends the need of demanding additional documents to verify the true identity of natural persons in their transactions with banks. Permissive phrases in the KYC requirements
of legal persons should be replaced with mandatory terms. Concerning PEPs, the FIC should come up with the list of PEPs and disseminate the list to banks to apply enhanced due diligence. To resolve the
danger of selling SOEs to launderers the FIC and the Privatization Agency should work jointly to identify the source of wealth of potential bidders. Banks shall diligently apply suspicious transactions to prevent
launderers. There should also be a cash transaction restriction at least in the cities to avoid the dangers of money laundering. There should be a separate committee to designate terrorists and clear procedures
of application and delisting should be introduced. The current freezing of terrorists‟ assets law shall recognize freezing „without delay‟ and the interest of innocent third parties should also be considered in the process. The FIC should be strengthened both financially and in human resources to undertake its duties. It should be accountable to the parliament. Finally, the relationship between NBE and FIC should be legally demarcated to avoid potential conflict and overlapping of power.