Ethiopia -- AML/CFT Compliance Regulatory Overview

It's crucial to preface this by stating that cryptocurrencies are currently not recognized as legal tender or regulated financial instruments in Ethiopia by the National Bank of Ethiopia (NBE). The NBE has consistently issued warnings against the use and trading of cryptocurrencies, citing their unregulated nature, volatility, and potential for illicit activities like money laundering and terrorist financing.

Therefore, there is no specific, dedicated regulatory framework for Virtual Asset Service Providers (VASPs) in Ethiopia as they are not officially licensed or permitted to operate.

However, any entity (including traditional financial institutions) that might inadvertently or indirectly deal with virtual assets, or any individual or entity engaged in financial activities that could involve virtual assets, would still fall under Ethiopia's general Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) legislation. If a VASP were to operate (even if not explicitly licensed or permitted), its activities would be subject to these general laws, and it would be highly exposed to legal and regulatory risks.

Here's an overview of the general AML/CFT requirements that would apply in the Ethiopian context:

AML/CFT Legislation in Ethiopia

The primary legislation governing AML/CFT in Ethiopia is:

1. Anti-Money Laundering and Countering the Financing of Terrorism Proclamation No. 1283/2022: This is the overarching law that repealed and replaced the previous Proclamation No. 780/2013. It establishes the legal framework for combating money laundering and terrorist financing.
2. National Bank of Ethiopia (NBE) Directives: The NBE issues specific directives to financial institutions under its supervision to implement the AML/CFT Proclamation. A key directive is:
   • AML/CFT Directive No. FIS/01/2020: While predating Proclamation 1283/2022, its principles regarding customer due diligence, suspicious transaction reporting, and record-keeping remain foundational for NBE-regulated entities and will likely be updated or complemented by new directives consistent with the latest Proclamation.

Key AML/KYC Requirements (General Application)

Based on Proclamation No. 1283/2022 and general AML/CFT principles, the following requirements would apply to "reporting entities" (which would include VASPs if they were recognized and licensed, and certainly apply to traditional financial institutions):

1. Customer Due Diligence (CDD) Requirements

Reporting entities are required to conduct CDD measures for all customers, especially when:

• Establishing business relationships.
• Carrying out occasional transactions above a prescribed threshold (e.g., ETB 200,000 for banks, though specific thresholds may vary and might not exist for virtual assets).
• There is a suspicion of money laundering or terrorist financing.
• There are doubts about the veracity or adequacy of previously obtained customer identification data.

CDD measures include:

• Identifying the customer and verifying their identity using reliable, independent source documents, data, or information. This includes obtaining:
  • For natural persons: full name, date of birth, nationality, permanent address, unique identification number (e.g., national ID, passport), and contact details.
  • For legal persons/arrangements: legal name, legal form, proof of incorporation/establishment, principal place of business, names of directors/partners/trustees, and beneficial ownership information.
• Identifying the beneficial owner(s) and taking reasonable measures to verify their identity. This involves looking through layers of ownership and control.
• Understanding the purpose and intended nature of the business relationship.
• Conducting ongoing due diligence on the business relationship and scrutinizing transactions undertaken throughout the course of that relationship to ensure consistency with the reporting entity's knowledge of the customer, their business, and risk profile.
• Enhanced Due Diligence (EDD) for higher-risk customers, relationships, or transactions (e.g., Politically Exposed Persons (PEPs), cross-border correspondent relationships, complex transactions, or transactions with high-risk jurisdictions).

2. Suspicious Transaction Reporting (STR)

Reporting entities are obligated to report suspicious transactions to the Financial Intelligence Centre (FIC).

• Reporting Obligation: Any transaction, attempted transaction, or activity that raises suspicion of money laundering, terrorist financing, or other predicate offenses must be reported.
• Thresholds: Suspicion overrides any transaction threshold. Even small amounts can be suspicious.
• No Tipping-Off: Reporting entities and their employees are prohibited from disclosing to the customer or any third party that a STR has been made or that a money laundering/terrorist financing investigation is being conducted.

3. Record-Keeping Obligations

Reporting entities must maintain records for a specified period to assist in investigations:

• Customer Identification Data: All records obtained through CDD measures (identity documents, verification details).
• Transaction Records: All transaction data, including the amount, currency, date, and parties involved (originator and beneficiary information).
• Business Correspondence: Records of inquiries, analysis, and decisions related to customer relationships and transactions.
• Retention Period: Records must generally be kept for a minimum of five (5) years after the business relationship is terminated or after the date of an occasional transaction.

Authority Overseeing Compliance

The oversight of AML/CFT compliance in Ethiopia is primarily shared by two key institutions:

1. Financial Intelligence Centre (FIC):

   • Role: The FIC is Ethiopia's Financial Intelligence Unit (FIU). It is responsible for receiving, analyzing, and disseminating financial intelligence related to suspicious transactions to law enforcement agencies. It is the central authority for receiving STRs.
   • URL: The FIC typically operates under a relevant Ministry (e.g., Ministry of Justice or Ministry of Finance) and may not have a standalone, publicly active website. Information is often found within governmental reports or the NBE's publications.

2. National Bank of Ethiopia (NBE):

   • Role: The NBE is the central bank of Ethiopia and the primary regulator and supervisor of financial institutions (banks, microfinance institutions, insurance companies, payment system operators, etc.). It is responsible for ensuring that these regulated entities comply with AML/CFT laws and directives. If Ethiopia were to regulate VASPs in the future, the NBE would likely be the primary supervisory authority.
   • URL: https://www.www.nbe.gov.et/

Conclusion

In summary, while Ethiopia has a robust general AML/CFT framework, it does not currently have specific regulations for cryptocurrencies or VASPs, as these assets are not legally recognized. Any entity operating as a VASP in Ethiopia would be doing so outside the regulated financial system, exposing itself to significant legal and operational risks. However, the general AML/CFT Proclamation No. 1283/2022 and NBE Directives provide the foundational requirements that would apply to any financial activity, and the FIC and NBE would be the relevant authorities for enforcement and oversight if such activities were deemed illegal or were brought under regulation in the future.