Mar.09, 2010

The Financial Action Task Force (FATF) has put Ethiopia and seven other countries on its blacklist in relation to money laundering and terrorist financing, posing risks to the International Financial System.

The FATF, which comprises of governments and regional organisations, revealed its blacklist after a meeting held at Abu Dhabi in the United Arab Emirates in response to the promise it made to the group of 20 major economies to identify countries that failed to cooperate in the implementation of the FATF action plan and international anti-money laundering or counterterrorist financing standards.

The list was made out of countries that either did not have laws against these acts of crime or failed to apply laws against money laundering and terrorist financing.

Ethiopia had strategic deficiencies towards implementing its proclamation on prevention and suppression of money laundering and the financing of terrorism, which it ratified in 2009, the FATF said. Although it is still under organisation, Ethiopia now has its Financial Intelligence Centre, which will implement the law. The blacklist categorisation is based on the absence or weakness of relevant policies, according to Alemseged Assefa, the centre’s director. Ethiopia could make it off of the list, once the FATF has reviewed the country’s progress, he said.

If Ethiopia remains on the list, it could be damaging to the economy. The country could lose much from investments and letters of credit (LCs), according to a senior official in the banking sector who declined to be identified. Foreign direct investment (FDI) could be at risk, he said, since investors refer a secured policy in the countries where they go to invest.

Ethiopia was placed on the list because the world sees East African countries as a terrorism threat, another anonymous banking executive said.