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Financial Institution Compliance Issues in Eritrea

Eritrea, a small country located in the Horn of Africa, has been struggling to implement effective anti-money laundering (AML) and combating the financing of terrorism (CFT) measures, according to a recent report. The Financial Action Task Force (FATF) has assessed Eritrea’s compliance with its recommendations and found significant shortcomings.

Areas for Improvement

The report highlights several areas where Eritrea needs to improve:

• Lack of effective national cooperation and coordination in preventing money laundering and terrorist financing
• Inadequate laws and regulations that do not adequately criminalize money laundering and terrorist financing, nor provide for adequate confiscation and provisional measures
• Failure to implement effective measures to prevent the misuse of non-profit organizations
• Inadequate financial institution secrecy laws
• Incomplete customer due diligence requirements
• Record-keeping practices in need of improvement

Additional Concerns

Eritrea’s reliance on third parties for AML/CFT purposes is limited, and its internal controls and supervision of financial institutions are insufficient. The country also lacks effective measures to prevent the misuse of new technologies, such as online payment systems.

Recommendations

The report recommends that Eritrea strengthen its AML/CFT framework by:

• Implementing adequate laws and regulations
• Improving national cooperation and coordination
• Increasing transparency and beneficial ownership requirements for legal persons and arrangements

Consequences of Non-Compliance

Eritrea’s failure to address these issues has significant implications for the country’s financial system and stability. The government must take immediate action to address these shortcomings and implement effective AML/CFT measures to prevent the misuse of its financial system.

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