Ethiopia, Kenya deficient in combating money laundering, terrorist financing – FATF warns

A global financial oversight body urged Ethiopia , Kenya and 6 other countries to address their ‘strategic deficiencies’ with respect to anti-money laundering and combating the financing of terrorism, abbr. as AML/CFT).

The warning came from the Financial Action Task Force (FATF) an inter-governmental body which sets standards, and develops and promotes policies to combat money laundering and terrorist financing. FATA 34 countries and governments and two international organizations as members, while 5 similar regional bodies and 15 other international organizations or bodies participate with an observer status, according to the info on its website.

In its Public Statement issued on June 24, FATF warned ‘members and other jurisdictions to apply counter-measures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/TF) risks emanating from the jurisdictions from Iran and Democratic People’s Republic of Korea (DPRK).’

The statement also listed 8 countries as

‘jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies’.

Those countries are Bolivia, Cuba, Ethiopia, Kenya, Myanmar,Sri Lanka, Syria and Turkey.

The statements describes the case of Ethiopia and Kenya as follows:

Ethiopia

Despite Ethiopia’s high-level political commitment to work with the FATF to address its strategic AML/CFT deficiencies, Ethiopia has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain. Ethiopia should work on addressing these deficiencies, including by:

1. adequately criminalising money laundering and terrorist financing (Recommendation 1 and Special Recommendation II);
2. establishing and implementing an adequate legal framework and procedures to identify and freeze terrorist assets (Special Recommendation III);
3. ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26);
4. raising awareness of AML/CFT issues within the law enforcement community (Recommendation 27); and
5. implementing effective, proportionate and dissuasive sanctions in order to deal with natural or legal persons that do not comply with the national AML/CFT requirements (Recommendation 17).

The FATF encourages Ethiopia to address its remaining deficiencies and continue the process of implementing its action plan.

Kenya

Despite Kenya’s high-level political commitment to work with the FATF and ESAAMLG to address its strategic AML/CFT deficiencies, Kenya has not made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain. Kenya should work on addressing these deficiencies, including by:

1. adequately criminalising terrorist financing (Special Recommendation II);
2. ensuring a fully operational and effectively functioning Financial Intelligence Unit (Recommendation 26);
3. establishing and implementing an adequate legal framework for identifying and freezing terrorist assets (Special Recommendation III);
4. raising awareness of AML/CFT issues within the law enforcement community (Recommendation 27); and
5. implementing effective, proportionate and dissuasive sanctions in order to deal with natural or legal persons that do not comply with the national AML/CFT requirements (Recommendation 17).

The FATF encourages Kenya to address its remaining deficiencies and continue the process of implementing its action plan, including by implementing the AML legislation and operationalising the new AML Advisory Board.

The Recommendations cited above, with regard to Ethiopia and Kenya, are the following:

[FATF’s forty Recommendations and nine special recommendations are drawn to combat money laundering and financing terrorism and have been recognised by the International Monetary Fund and the World Bank as the international standards for combating money laundering and the financing of terrorism.]

Special Recommendation II
Criminalising the financing of terrorism and associated money laundering
Each country should criminalise the financing of terrorism, terrorist acts and terrorist organisations. Countries should ensure that such offences are designated as money laundering predicate offences.

Special Recommendation III
Freezing and confiscating terrorist assets
Each country should implement measures to freeze without delay funds or other assets of terrorists, those who finance terrorism and terrorist organisations in accordance with the United Nations resolutions relating to the prevention and suppression of the financing of terrorist acts.
Each country should also adopt and implement measures, including legislative ones, which would enable the competent authorities to seize and confiscate property that is the proceeds of, or used in, or intended or allocated for use in, the financing of terrorism, terrorist acts or terrorist organisations.

Recommendation 17
Countries should ensure that effective, proportionate and dissuasive sanctions, whether criminal, civil or administrative, are available to deal with natural or legal persons covered by these Recommendations that fail to comply with anti-money laundering or terrorist financing requirements.

Recommendation 26
Countries should establish a FIU that serves as a national centre for the receiving (and, as permitted, requesting), analysis and dissemination of STR and other information regarding potential money laundering or terrorist financing. The FIU should have access, directly or indirectly, on a timely basis to the financial, administrative and law enforcement information that it requires to properly undertake its functions, including the analysis of STR.

[Interpretive Note:] Where a country has created an FIU, it should consider applying for membership in the Egmont Group. Countries should have regard to the Egmont Group Statement of Purpose, and its Principles for Information Exchange Between Financial Intelligence Units for Money Laundering Cases. These documents set out important guidance concerning the role and functions of FIUs, and the mechanisms for exchanging information between FIU.

Recommendation 27
Countries should ensure that designated law enforcement authorities have responsibility for money laundering and terrorist financing investigations. Countries are encouraged to support and develop, as far as possible, special investigative techniques suitable for the investigation of money laundering, such as controlled delivery, undercover operations and other relevant techniques. Countries are also encouraged to use other effective mechanisms such as the use of permanent or temporary groups specialised in asset investigation, and co-operative investigations with appropriate competent authorities in other countries.

[Interpretive Note:] Countries should consider taking measures, including legislative ones, at the national level, to allow their competent authorities investigating money laundering cases to postpone or waive the arrest of suspected persons and/or the seizure of the money for the purpose of identifying persons involved in such activities or for evidence gathering. Without such measures the use of procedures such as controlled deliveries and undercover operations are precluded.