Financial Crimes on the Rise in Ethiopia Due to Cash-Heavy Economy
The Ethiopian economy’s heavy reliance on cash has led to a surge in financial crimes, including money laundering, corruption, and illicit financial flows. A recent study reveals that most cash transactions in Ethiopia take place outside the formal financial system, making it difficult for authorities to track and regulate.
Cash-Intensive Industries Vulnerable to Criminal Activities
Cash-intensive industries such as:
- Real estate
- Construction
- Agriculture
are particularly vulnerable to criminal activities due to their lack of transparency. Many businesses operate on a cash-only basis, enabling criminals to launder money through these sectors, further perpetuating corruption and financial instability.
Government Efforts to Combat Financial Crimes
To combat the problem, the Ethiopian government has implemented several measures aimed at reducing the use of cash, including:
- Restrictions on cash withdrawals from financial institutions
- Limits on the amount of cash individuals can hold
- Demonetization of certain banknotes
However, experts warn that these efforts may not be enough to significantly reduce financial crimes.
Improving Financial Inclusivity and Regulation Key to Reducing Future Criminality
According to Messay Asgedom Gobena, lead researcher on the study:
“Improving financial inclusivity by expanding basic financial products to rural areas, digitalizing the country’s payment system, and raising general financial awareness are crucial steps in reducing future criminality.”
Corruption Within Law Enforcement Agencies and Financial Institutions Hinders Efforts
Corruption within law enforcement agencies and financial institutions has hindered efforts to combat financial crimes. According to Daniel Gebreegziabher Kebede, co-author of the study:
“Corruption is a major obstacle in our fight against financial crimes. It undermines trust in the system and allows criminals to operate with impunity.”
Initiatives Aimed at Strengthening Financial Regulation and Oversight
The Ethiopian government has launched several initiatives aimed at strengthening financial regulation and oversight, including:
- Establishment of a new financial intelligence agency
- Improving financial reporting and auditing standards
However, experts warn that more needs to be done to address the root causes of financial crime and promote a cashless economy.
Conclusion
The study highlights the urgent need for Ethiopia to adopt a comprehensive approach to addressing financial crimes. By improving financial inclusivity, digitalizing payment systems, and strengthening regulation and oversight, the country can reduce its reliance on cash and create a more stable and secure financial environment.