Assessment on the Role of Ethiopian Private Banks in Combating Money Laundering and Their Effectiveness: The Case of Dashen & Berhan Banks

Abstract

Money Laundering has a significant economic and social consequence for countries worldwide. It adversely affects the financial sector at international level as they are major channels for fund transactions. There is a rapid increase of financial crime and illicit funds that are being exchanged after they are laundered mainly through banks and used to finance other illegal activities such as organized crimes. This triggered the international community to react in an organized way against money laundering and countries that have deficiencies in anti-money laundering policies and procedures are categorized as high-risk countries. Ethiopia has been on the black list of the Financial Action Task Force (FATF) until recent years. The National Bank of Ethiopia and the Financial Intelligence Center have made significant efforts in fighting money laundering and they comply with the international standards thereby enabling Ethiopia to come out of the black list. The study examined the role private banks play in curbing money laundering and their effectiveness, with particular focus on Dashen and Berhan Banks as a case study. To collect the information for the case study from the targeted Banks and the Financial Intelligence Centre, questionnaires, interview, literature review and observations were applied. From the study, the regulatory bodies especially the FIC requires all banks to implement AML/CFT regulations which are based on the recommendations by FATF. It was observed that both Banks have various anti-money laundering procedures. Although it obvious that both Banks have various AML procedures they have not been able to successfully implement them due to some weaknesses and strong challenges. These were mainly as a result of weaknesses in the internal compliance function structures of the Banks such as : lack of trained manpower, adequate staff; lack of AML software, focus on deposit mobilization and profit as well as insufficient cooperation from and among competent authorities. It is recommended that the Banks to strengthen their compliance function acquire AML software, take the initiative to fight against money laundering and for the regulatory bodies to enhance the efforts by taking measures to facilitate the effective implementation of AML in Ethiopia financial sector.