Financial Crime World

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Effectiveness of Anti-Money Laundering Preventive Measures in Ethiopia

Case Study on Commercial Banks and Financial Intelligence Unit

Introduction

Money laundering is a complex crime that involves the conversion of illegal proceeds into legitimate funds through various financial transactions. In this study, we examine the effectiveness of anti-money laundering preventive measures in Ethiopia, focusing on commercial banks and the financial intelligence unit (FIU).

Definition of Key Terms

  • Anti-Money Laundering (AML): Laws, regulations, and procedures designed to combat money laundering.
  • Financial Intelligence Unit (FIU): A central agency responsible for receiving, analyzing, and distributing information on suspicious transactions related to money laundering and terrorism financing.
  • Politically Exposed Person (PEP): An individual who has a prominent public position, such as head of state, government, political party or government agency.
  • High-Risk Customer: A customer that poses higher risks for money laundering and terrorism financing due to their occupation, location, or other factors.

Literature Review

Money laundering is a complex crime that involves the conversion of illegal proceeds into legitimate funds through various financial transactions. The process can be broadly categorized into three stages: placement, layering, and integration (Levi, 1998). AML measures are designed to prevent and detect money laundering activities, including customer due diligence, transaction monitoring, and reporting of suspicious transactions (Jusoh et al., 2010).

Research Methodology

This study employs a qualitative case study research design, focusing on ten commercial banks and the FIU in Ethiopia. Data were collected through semi-structured interviews with officials from these institutions.

Results

The results show that anti-money laundering preventive measures in Ethiopia are not effective. Several respondents mentioned that they lack resources and capacity to implement these measures effectively. Respondents also stated that the FIU lacks sufficient resources to effectively monitor and investigate money laundering activities.

Discussion

The findings indicate that the ineffectiveness of AML measures in Ethiopia is due to several factors, including lack of resources and capacity to implement these measures effectively, lack of cooperation between commercial banks and the FIU, and insufficient resources available to the FIU to monitor and investigate money laundering activities.

Conclusion

Anti-money laundering preventive measures in Ethiopia are not effective. To improve their effectiveness, we recommend increasing the resources and capacity of commercial banks to implement these measures effectively, enhancing cooperation between commercial banks and the FIU, and providing sufficient resources to the FIU to effectively monitor and investigate money laundering activities.

Recommendations:

  1. Increase the resources and capacity of commercial banks to implement AML measures effectively.
  2. Enhance cooperation between commercial banks and the FIU.
  3. Provide sufficient resources to the FIU to effectively monitor and investigate money laundering activities.