CHALLENGES AND PRACTICES OF ANTI-MONEY LAUNDERING AND COMBATING OF TERRORISM FINANCING-THE CASE OF THE ETHIOPIAN COMMERCIAL BANKS

Abstract

Over the last decade, there has been an increase in the number of money laundering and terrorist financing crimes across the globe. In a bid for authorities to control these criminal activities both locally and internationally, the Financial Action Task Force (FATF) 40+9 recommendations were established as a mechanism for identifying, combating and controlling money laundering activities. Ethiopia recently endeavored to combat money laundering and terrorist financing by criminalizing money laundering and financing of terrorism through proclamation no. 780/2013. In this regard, banks play a leading role as the main objective of the law is to ensure the integrity of the Ethiopian financial system. Therefore, the purpose of this research is to assess the Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) practice and challenges of commercial banks in Ethiopia in accordance with international standards and applicable laws. This study employed exploratory and descriptive research design in the form of close ended questionnaires completed by 69 employees of Ethiopian commercial banks. To assess the practice and challenges 48 questions were provided to the respondents to acquire quantitative data and eight close ended interview questions were also provided to accommodate opinions of FIC officials. Based on the respondents among the commercial banks' the study found that commercial banks in Ethiopia have been discharging their responsibilities by implementing and practicing AML/CTF. However, ML/TF preventive measures revealed that commercial banks do not have automatic electronic customer/transaction screening and the finding confirmed that absence of national ID and lack of list of Political Exposed Persons, lack of technology to enhance AML/CFT activities and lower awareness in the country are serious challenges for banks. Therefore EFIC and NBE and other responsible organs of the country have to focus their efforts on the most fundamental tasks and main challenges, and need to give utmost priorities about AML/CFT. Finally, as this study focuses on commercial banks, further research is needed on the other financial and nonfinancial sectors which are vulnerable to money laundering and terrorist financing.