Financial Crime World

Ethiopia: Unmasking the Hidden Financial Crime Threats

In the bustling Horn of Africa nation of Ethiopia, a complex web of financial crimes has gone unnoticed for years. Known for its rich history and diverse culture, Ethiopia is not typically associated with money laundering, terrorism financing, or corruption. However, recent reports paint a different picture of Ethiopia’s financial landscape.

Ethiopia: A Moderate-High Risk Country

The Ethiopian government, in collaboration with global organizations, conducted a National Risk Assessment (NRA) in 2016. The assessment identified Ethiopia as having an overall money laundering and terrorist financing threat level of medium and medium-high, respectively. Ethiopia’s vulnerability to these threats is classified as medium.

Criminal Activities and Highest Threats

The NRA report highlighted 23 criminal activities generating financial proceeds. The most significant sources of financial crime threats are:

  1. Tax evasion
  2. Human trafficking and migrant smuggling
  3. Corruption
  4. Goods smuggling (contraband)
  5. Illegal hawala
  6. Fraud

Corruption: A Notorious Problem

Ethiopia’s ranking on Transparency International’s (TI) Corruption Perceptions Index (CPI) has shown only slight improvement in recent years. In 2019, Ethiopia ranked 96th out of 180 countries, with a score of 37 out of 100. This issue underscores the need for continuous efforts to combat corruption in Ethiopia.

Organized Crime: A Growing Concern

The 2019 African Organised Crime Index classified Ethiopia as a “Low-Criminality, High-Resilience” country. The most prevalent criminal markets in Ethiopia are:

  1. Arms trafficking
  2. Human trafficking
  3. Migrant smuggling
  4. Cannabis trade

Modern Slavery: A Significant Issue

The U.S. Department of State’s 2020 Trafficking in Persons (TIP) Report identified Ethiopia as a Tier 2 country, with an estimated 614,000 modern-day slaves. The report recognized Ethiopia’s efforts to tackle the problem but cited deficiencies in addressing internal labor exploitation. The government response rating for Ethiopia is “CCC.”

People Smuggling: A Major Source and Transit Country

Ethiopia is identified as a source and transit country for people smuggling along three major African migration routes:

  1. The Northern route to Europe
  2. The Southern route to South Africa
  3. The Eastern route to the Middle East

Other Criminal Markets

The Organised Crime Index (OC Index) identified several other criminal markets in Ethiopia, including:

  1. Drugs
  2. Timber trafficking
  3. Illegal mining

In conclusion, Ethiopia’s financial crime landscape is multifaceted, with corruption, organized crime, and human trafficking being the most significant threats. Despite these challenges, progress has been made in addressing these issues. With continued international and local cooperation, Ethiopia can effectively combat these challenges and strengthen its financial systems.