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Ethiopia’s Know Your Customer (KYC) Requirements: A Comprehensive Guide

Introduction

In an effort to combat financial crime and maintain the integrity of its financial system, the Ethiopian government has implemented strict know your customer (KYC) requirements. These regulations are designed to ensure that all financial institutions and businesses operating in the country verify the identity of their customers and report any suspicious transactions.

Key Requirements

  • Customer Identification: Financial institutions and businesses must verify the identity of all customers through a combination of documentary evidence, biometric data, and other methods.
  • Proof of Income and Source of Funds: Customers who open new accounts or conduct high-value transactions must provide proof of income and source of funds.
  • Reporting Requirements: All cash deposits and withdrawals exceeding Birr 200,000 (approximately USD10,000) must be reported to the Financial Intelligence Center (FIC).
  • Suspicious Transaction Reporting: Suspicious transactions must be postponed until they are reported to the FIC, which will then determine a course of action.

Risk-Based Approach

Ethiopia’s AML regime employs a risk-based approach, which means that financial institutions and businesses must conduct enhanced due diligence on high-risk customers and simplified due diligence on low-risk customers.

Automated Suspicious Transaction Monitoring Technology

While there is no requirement to use automated suspicious transaction monitoring technology, financial institutions and businesses are encouraged to implement such systems to identify potential money laundering and terrorist financing activity.

Penalties for Non-Compliance

Financial institutions and businesses that fail to comply with the KYC requirements may face severe penalties, including fines and imprisonment. Individuals convicted of non-compliance may be sentenced to three to five years in prison and fined up to ETB 5,000 (approximately USD300).

FATF Mutual Evaluation

Ethiopia’s AML/CFT regime has been evaluated by the Financial Action Task Force (FATF), with the most recent mutual evaluation conducted in 2015.

Minimum Transactions

All cash deposits and withdrawals exceeding ETB 222,381 (approximately USD10,000) must be reported to the FIC.

Overall, Ethiopia’s KYC requirements are designed to ensure that financial institutions and businesses operating in the country maintain the highest standards of integrity and compliance with anti-money laundering and counter-terrorist financing regulations.