Ethiopia’s Shadow Economy: Unmasking the Various Forms of Money Laundering

By: Tadesse Woldemariam (Journalist and Researcher)

Introduction

Addis Ababa, Ethiopia - Ethiopia’s growing economy has seen a significant increase in financial transactions. However, not all transactions are above board. A recent study by Messay Asgedom Gobena of Addis Ababa University sheds light on the various forms of money laundering rampant in Ethiopia.

Money Laundering Techniques in Ethiopia

According to the research published in the Journal of Money Laundering Control, Ethiopian criminal networks employ several laundering techniques:

Money laundering via financial institutions: Criminals use legal financial institutions to transfer, disguise, or conceal the proceeds of their illegitimate activities.
Trade-based money laundering: Illegally generated funds are disguised in international trade transactions. Ethiopia’s booming trade activities make it an attractive destination for this type of money laundering.
Cash-based money laundering: Criminals use cash to carry out transactions, making it difficult to trace the funds.
Hawala operations: Hawala is an informal value transfer system. Money is sent from one hawala broker to another, often across international borders, without crossing a physical border or involving actual money.
Shell companies: Criminals use fake or legitimate companies to hide their identity and the proceeds of their illicit activities.
Anonymous beneficiaries: Criminals use the names of innocent individuals as beneficiaries to hid the true origins of the funds.

Primary and Secondary Data Sources

The study relied on primary data obtained from interviews with key stakeholders in Ethiopia, including the Ethiopian Financial Intelligence Center, Ethiopian Customs Commission, selected commercial banks, and law enforcement agencies. Secondary data was gathered from government reports, media press, statutes, and other online and offline sources.

Emerging Technologies and Money Laundering

One of the most alarming findings was that criminals have recently started using financial technologies and virtual currencies to launder their ill-gotten gains.

Typologies of Money Laundering in Ethiopia

The typologies of money laundering continue to evolve, often intertwined and transnational, but always tailored to Ethiopia’s unique political economy.

Importance of Addressing Money Laundering

Money laundering results in significant economic losses for the country and contributes to overall instability. Understanding the various money laundering schemes can help strengthen Ethiopia’s policy and regulatory frameworks.

Conclusion

This research provides an original contribution to the ongoing debate about money laundering in cash-intensive economies.

References:

Gobena, M.A. (2023). Money laundering in Ethiopia: An analysis of typologies and techniques. Journal of Money Laundering Control, 26(4), 696-708. https://doi.org/10.1108/JMLC-03-2022-0053