Financial Institutions, Real Estate Developers Among Actors In Money Laundering: Justice Ministry

MPs worry Asset recovery, Anti-Money Laundering bills designed to stifle opposition, journalists

Officials of the Ministry of Justice have implicated banks, microfinance institutions, real estate developers, NGOs, remittance service providers, and vehicle dealerships in money laundering as they push for Parliament to ratify two controversial bills.

“We have conducted investigations based on 40 recommendations forwarded to Ethiopia regarding money laundering and financial terrorism deficiencies. We found that real estate firms, NGOs, car dealers, MFIs and banks are used to launder illegally obtained assets and finances,” Hana Arayaselassie, newly appointed Justice Minister, and her deputies told MPs.

The risk assessments were conducted based on recommendations forwarded by the Financial Action Task Force (FATF) and Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).

They are linked to the Ministry’s Prevention and Suppression of Money Laundering and Financing of Terrorism, and Asset Recovery proclamations, which have been tabled to Parliament for approval for ratification before the next performance evaluation under FATF scheduled to take place in 2026.

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Ethiopia has improved on most indicators used to gauge performance, but several deficits remain, according to Justice officials.

Among them is the lack of laws aimed at tracing and penalizing the source of cash, precious metals, and other commodities smuggled out via borders.

“The existing laws enable the confiscation of such commodities, but not tracing their source,” said Muluken, a Ministry official.

The Ministry’s first bill includes provisions that would fill this gap.

“Dealers in precious metals and in precious stones shall identify their customers in accordance with this Proclamation whenever receiving payment in cash in an amount more than the amount fixed by the Service. Motor vehicle dealers, real estate, developers, agents and brokers shall identify the parties, in accordance with this Proclamation, when involved in transactions concerning the buying or selling of real estate or vehicles,” it reads.

The Financial Intelligence Service (FIS) is mandated to take on various roles in tackling money laundering and terrorism financing, particularly in Ethiopia’s financial institutions and cross-border transactions.

“We also need to maximize informal cooperation with financial intelligence institutions across the world. Apart from the foreign relations through the Ministry of Foreign Affairs, the National Bank of Ethiopia also needs a mandate to forge such informal cooperation and information exchange globally,” said Muluken.

Ethiopian financial institutions also will be obliged to establish compliance departments to ensure the implementation of the two bills and all FATF recommendations, according to Justice officials.

The bills also touch on virtual currencies.

“We are not saying virtual currency is allowed in Ethiopia. it is neither allowed nor banned. So there are activities. These bills also investigate if virtual currencies are being used as means of money laundering or terrorism financing,” said Muluken.

Lawmakers had several concerns about the legislation, particularly the Asset Recovery Proclamation.

The bill would work retrospectively, enabling officials to go back as far as 10 years in investigations involving asset acquisition. The draft states the assets in question must be valued at more than 10 million birr to trigger a retrospective investigation.

MPs asked why the experts who drafted the bill chose 10 years as the limit, and what led to the 10 million birr threshold.

“The figures are not justified. Someone who embezzled nine million birr is legitimate, but 10 million is illegal; why? How can we make sure innocent people will not fall victim to these bills? Courts, police and judicial officials might abuse these bills, and exploit innocent citizens. The law must include articles that hold justice and law enforcers accountable,” said Melese (PhD), an MP.

Other legislators questioned why banks and other financial institutions have not yet been investigated for involvement in money laundering and terrorism financing, as well expressed concerns about the amount of authority the bills place in the Justice Ministry’s hands.

Commonalities with the already-ratified Anti-Corruption Proclamation were also under scrutiny.

“Why is the government introducing redundant proclamations without first implementing the Anti-Corruption Proclamation? For instance, it mandates all government officials to register their assets and properties, but so far, nobody has done so. There is also no report compiled on progress. Why is the government producing two more proclamations in the same areas? Why should the private sector and individuals be victims while the law does not apply to officials,” asked one MP.

Lawmakers also noted that, prior to the currency floating a few months ago, members of the diaspora sent remittances through the parallel market because it offered a much higher rate.

“Many Ethiopian citizens built homes and bought properties using money sent via the black market. now they are going to lose their assets because of these bills,” said another MP.

Desalegn Chane (PhD), an MP from the opposition National Movement of Amhara party, believes the bills are politically motivated.

“The Anti-Corruption Proclamation never worked on corrupt government officials. It was only implemented on opposition politicians, journalists and dissidents. Now, these two bills will also be used as tools to hunt down people who have different ideologies; not corrupt people,” he said.

Desalegn worries the judiciary is incapable of preventing the government executive organ from using the bills as political tools.

“Political differences should be solved through dialogue, not such stifling bills. We know these kinds of bills are introduced to attack specific people,” he said.

Lawmakers are uneasy about the retrospectivity of the second proclamation going against a basic tenet of Ethiopian criminal law. Others asked why the two bills are not merged into one.

“These two bills are raising several questions and chaos, this is because there are several vested interests,” Lomi Bedo, deputy house speaker, said.

Belayneh Yirga, a state minister of Justice, responded to the questions.

“We picked ten years because institutions are legally forced to keep data for ten years. The 10 million birr threshold can be reduced if Parliament recommends so. The Ministry will not administer recovered assets; a trust will be formed to manage them. Money sent through the black market and already invested in Ethiopia might be exempted if people can present sufficient circumstantial evidence, like whether they were really diaspora,” he said.

Belayneh told MPs the intention behind the legislation is to crack down on cases involving large sums of money.

“There are already cases that have been identified. We won’t focus on petty cases. But the government is sovereign and can investigate anyone under suspicion,” he said.

The draft proclamation states the Ministry will be able to freeze bank accounts for seven days, while courts can extend the freeze to up to 120 days for special investigations.

MPs noted that 120 days would be enough to bankrupt most businesses who fall under the ‘special investigation’ category, but Belayneh said the government would not be liable for damages or losses accrued during an investigation.

The Minister provided the reasoning behind the retrospective clauses.

“The reason these bills are retrospective is to prevent people from gaining economic benefits in the future from illicit funds they obtained in the past,” said Hana.

Parliament is due to incorporate new input and make revisions to the bills before they are ratified.