Eritrea Under Scrutiny Over Financial Crimes as Economic Activity Grows
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Eritrea, a Horn of Africa country, is facing increasing pressure over its financial crimes as the country’s economic activity grows and vulnerabilities rise. 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), experts warn that Eritrea’s informal economy, limited regulatory structure, and proximity to regions known for terrorist and criminal organizations make it susceptible to money laundering and related activities.
AML and CFT Concerns
A report by the US Department of State classified Eritrea as a ‘Monitored’ jurisdiction in 2016, citing concerns over human rights abuses, including forced labor and sex trafficking. The report also highlighted reports suggesting that some Eritrean government and military officials profit from contraband and human smuggling, extortion, and possibly funding destabilizing forces in regional conflicts.
Economic Growth and Vulnerabilities
Eritrea’s economy has seen growth due to its mining industries, particularly gold and copper exports, which have increased the country’s susceptibility to money laundering. The influx of capital from mineral exports has also made the country reliant on informal remittance systems and hawala due to the non-convertibility of the nakfa currency in international markets.
Security Concerns
The Eritrean 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. While there is no solid evidence suggesting Eritrea is a significant market or transit route for narcotics, its association with such actors raises concerns over financial crimes.
Recommendations
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. Experts warn that failure to do so could have severe consequences for the country’s financial sector and its reputation globally.
Key Takeaways
- Eritrea is facing increasing pressure over its financial crimes due to its informal economy, limited regulatory structure, and proximity to regions known for terrorist and criminal organizations.
- The country’s economic growth has increased its susceptibility to money laundering and related activities.
- Addressing vulnerabilities and adhering to global AML and CFT standards will be crucial for mitigating potential risks and promoting financial stability.
- Failure to do so could have severe consequences for the country’s financial sector and its reputation globally.