Financial Crime World

Financial Fraud Statistics in Eritrea Under Scrutiny Amid Economic Growth

Eritrea, a country located in the Horn of Africa, is facing increased scrutiny over its growing economy and vulnerabilities to financial crimes. Despite not being listed as a country with strategic anti-money laundering (AML) and counter-terrorist financing (CFT) deficiencies by the Financial Action Task Force (FATF), the country has yet to undergo a Mutual Evaluation Report assessing its adherence to these standards.

Key Findings

  • According to the US Department of State’s 2016 International Narcotics Control Strategy Report, Eritrea was classified as a ‘Monitored’ jurisdiction due to several key findings.
  • The report noted that while Eritrea is not a significant financial center, its economy has seen growth from mining industries in collaboration with international companies.

Vulnerabilities

  • The influx of capital from mineral exports, particularly gold and copper, has increased the country’s susceptibility to money laundering and related activities despite its informal, cash-based economy and limited regulatory structure.
  • Reports suggest that some Eritrean government and military officials profit from contraband and human smuggling, extortion, and possibly funding destabilizing forces in regional conflicts.

Economic Dependence

  • Eritrea’s economic dependence on revenue from taxes paid by Eritreans abroad and formal remittances is significant.
  • A large portion of the population relies on informal, often underground, remittance systems and hawala due to the non-convertibility of the nakfa currency in international markets.

Regional Instability

  • The country’s proximity to regions known for terrorist and criminal organizations contributes to increased susceptibility to money laundering and related activities.
  • Eritrea’s security apparatus has been linked to providing training, supplies, and financing to destabilizing forces in the region, resulting in a UN Security Council arms embargo against Eritrea since 2009.

Conclusion

  • As Eritrea continues to navigate regional instability and economic growth, addressing these vulnerabilities and adhering to global AML and CFT standards will be crucial for mitigating potential risks and promoting financial stability.