The Financial Intelligence Centre (FIC) is working on a draft bill to replace the 2009 Anti-money Laundering & Combating the Financing of Terrorism, (AML/CFT) Proclamation, which is said to be vague and noncompliant with international conventions.
The Proclamation had sought to protect the financial sector from money laundering, where funds obtained illegally are passed off as legitimate through different methods like investments, gifts, and remittances to mask the source.
Ethiopia's placement in Africa makes it vulnerable to money laundering and financing of terrorist groups, according to a US state department money laundering report this year. Hence, the law seeks to prevent financing terrorist activities, which can make the financial sector and the country culpable.
Africa loses around 60 billion dollars annually due to money laundering, according to research presented at an anti-money laundering conference by the Ethiopian International Institute for Peace & Development (EIIPD).
For the last 39 years, between 854 billion to 1.8 trillion dollars flew out of African countries, mainly in the Sub-Saharan region, according to a study done by the UN Economic Commission for Africa (ECA).
The original Proclamation was the one that set the stage for the establishment of the FIC itself, which was charged with investigating cases of money laundering and financing of terrorism, ensuring compliance by accountable persons, enhancing public awareness, and establishing appropriate information management systems.
Despite the steps taken against money laundering, including ratifying the Proclamation, it is still not sufficient, according to a June 2012 report by the Financial Action Taskforce (FATF) on money laundering, an intergovernmental organisation formed by G7 countries.
Ethiopia needs to adequately criminalise money laundering and terrorist financing, ensure a fully operational and effectively functioning financial intelligence unit, and implement an adequate legal framework and procedures, according to the report.
"Because the Proclamation was new, at the time, there were bound to be some gaps when it was implemented," Berihu Tewoldebirhan, legal services head at the FIC, told Fortune. "Some terms are vague and not properly defined; the law was not written in accordance with international conventions concerning the matter."
The new bill seeks to provide detailed definitions, of some of the terms, avoid cross-references as much as possible in order to become self-sufficient, and include international conventions, in addition to making adjustments to the overall structure of the Proclamation.
"Some terms, like illicit financing, are not properly defined in the Proclamation, which will be corrected in the draft Proclamation," according to Berihu.
In addition, some of the definitions, like money laundering, simply refer the reader to the Criminal Code or the Antiterrorism Proclamation of 2009.
"The point is to make the Proclamation self-sufficient as much as possible, instead of referring to many sources," Berihu told Fortune.
The structure of the Proclamation may also change.
"Some procedural rules are placed right between substantive matters that deal with rights and responsibilities, so the order of the articles may see some change," Berihu explained. "The point is to make the law more forceful in fighting money laundering."
Relevant stakeholders, including the Ministry of Justice (MoJ), the Federal Ethics & Anticorruption Commission (FEAC), National Bank of Ethiopia (NBE), the Ethiopian Revenues & Customs Authority (ERCA), and the Ministry of Finance & Economic Development (MoFED) gave their input after the existing Proclamation started being, according to Berihu.
An international consultant, whose name remains undisclosed, was hired two months ago to view the progress of the Proclamation.
As of now, the Intelligence Centre is in the process of combining inputs from stakeholders before finalising the draft, according to Berihu.
"Once everything is finalised, banks and other financial institutions will be called to discuss the bill," he told Fortune.
In previous meetings organised by the FIC to strengthen anti-money laundering measures, banks complained that the Proclamation was not detailed enough and that they lack awareness about it.
"The public does not have awareness about the Proclamation," the president of a private bank told Fortune. "There are some who now prefer to handle their transactions outside of financial institutions because they are scared that their information will be used for something else."
In addition, the requirement by a directive issued to implement the Proclamation asks banks to report transactions of more than 200,000 Br to the FIC, which is seen as unfeasible by some bank employees.
"Ethiopia is a cash-intensive country, and 200,000 Br is a relatively small amount to carry around, especially for businessmen, so the bar should be raised a little bit, because weekly reports are creating too much paperwork," a compliance officer at a private bank, who wanted to remain anonymous, told Fortune.
The 200,000-Br standard was taken from a US law, which requires that transactions of more than 10,000 dollars be reported.
Despite such complaints, the FIC called a meeting last week with banks in order to discuss how to further strengthen anti-money laundering efforts and asked them to make sure that they have a compliance officer and report large money transactions and suspicious activities on a weekly basis, as required by the law.