Recently attempts by the government to reign in black market traders and money launders have led to the formation of a new committee. Gemechu Weyuma Director General of Financial Intelligence Center, the agency responsible for investigating fraud in the financial sector. His agency has over 40 employees and is expected to expand as partnerships are currently being formed with a wide variety of stakeholders. Capital’s Muluken Yewondwossen sat down with him to talk about the challenges of forex.
Capital: You are planning to sign a Memorandum of Association with the Charity and Society Agency. What will be included in the MOU?
Gemechu Weyuma: The MOU is an agreement that helps us work together. In the proclamation we have listed regulatory bodies as well as stake holders. Among those is the Charity and Society Agency.
So when we say that we want to sign a MOU with them, it’s not because we have seen criminal activities but to work together to combat criminal activities in the sector in the future.
There are divisions over what they will do on their own and what we will do on our own and then we will work together when it is needed.
We are not only signing the agreement with the Charity and Society Agency, we plan on doing this with others and actually we have done so already.
Capital: Which other institutions have you signed agreements with?
Gemechu: For example with the Federal Police, bank’s associations, Ethiopian Revenue and Customs Authority, National Bank, Ministry of Justice; we have signed agreement with all of these. Soon, we will sign the MOU with the Ministry of Trade, Ministry of Urban Development and Housing Construction and so on.
Capital: With your current structure, you have about 40 employees and now you are working to increase your capacity. How is that going?
Gemechu: When the center was first established, there was no experience, there was nobody working in this sector that we could learn form.
So our structure was done in a way that would only enable us to start working. After we started the work and began seeing how things operate, we learned that we would need a lot of human capacity and we saw that there were a lot of gaps to fill so that is what we are trying to fix with a new structure.
To do this, we looked at the experiences of those in South Africa, Mauritius, Tanzania; we looked at their experiences and we modeled our own based on that. The new structure plan is expected to be approved by the government this year.
Capital: With the new structure, how many employees will you have, and most are experts correct?
Gemechu: Yes there are experts, we expect it to grow up to 130, double the current capacity.
Capital: Do you have plans to expand your presence in the regions as well since you will have a bigger capacity?
Gemechu: Still now the headquarters is in Addis Ababa, we haven’t yet thought about opening branch offices, we want to strengthen the main office first. We would also need to look into what kind of gaps there are in the regions; identify which region needs us and so on.
Capital: There is a lot expected from your institution, but on the other hand some say not much attention has been given to it. What is your comment on this?
Gemechu: We can’t really say the government isn’t giving the institution attention. It is because it did pay attention that the institution was established, even the salary of the employees here is different than other civil servants, it is higher; this shows it has gotten attention. The institution is also over seen directly by the Prime Minister; this also shows the importance.
Like all other institutions, there are of course some issues and when questions are raised to solve those issues and meet demands, sometimes there are answers and sometimes you don’t get answers. But we cannot say there was no attention at all.
Capital: It has been five years now since the agency was established, in which sector would you say money laundering is more prevalent, is it in trade, trafficking or finance?
Gemechu: That is a good question. Money Laundering is a huge problem currently, if we don’t curb it now, it will become an even bigger issue. From all the tips we are getting, we see that there is a lot of tax evasion and fraud.
Capital: How bad are the cases you look at when it comes to the tax evasion and fraud?
Gemechu: This is an issue that can be easily curbed. For example, there needs to be more awareness creation on tax paying and if we make an example of those that are involved in evasion and fraud, it would be very effective.
Capital: When it comes to the issue of LC and banks, the issue is subjective how well do they work with you?
Gemechu: Like you have mentioned, there are problems when it comes to LC. Both importers and exporters need to open LC when they import and export goods.
When they open LC they deal with National Bank and when they import and export, the deal with ERCA. It was the fact that these two institutions were not working in synergy that caused problems.
Now, after discussions, the information we have, the two institutions are working together and we believe that due to this, the issue will be solved.
Capital: With regards to the issue of the black market, you stated that studies have been carried out and some decisions will be implemented. Can you tell us more about that? What kind of committee has been set up and when do you think it will be implemented?
Gemechu: The study we have done, especially on illegal money transfer, we tried to see what the causes were. The causes include, those that leave the country illegally will have problems sending in money using banks, so they resort to using illegal means. After that money enters the market it might be an input for the black market.
The study also shows that, there are embassies, diplomats and so on in the country that are paid in hard currency and because there is some difference in the exchange rate, they do their exchange in the black market. So we have learned from the study that there needs to be a lot of awareness creating activities.
Our country hosts a lot of conferences and many delegates and attendees bring in a lot of hard currency and again that money usually ends up in the black market through brokers. So these are the basis for the growth of the black market.
What needs to be done is that the government needs to make sure that the gap between exchange rates in banks and the black market is very small, that is already happening, but it needs to be much smaller. That encourages people to use the legal ways of exchanging money.
We just recently decided to establish a committee. You know hard currency leaves the country in different ways, it can be through cross country drivers, brokers and so on.
We had to look at what legal gaps there were and how to close them. Is it because there is no law at all or is it that the law is not implemented? So these are the kind of questions and work that the committee will take on, I believe. We will also be part of the committee. It will also include the National Bank, Federal Police, the Prime Minister’s Office, Ministry of Foreign Affairs, ERCA and so on.
Capital: There is also shortage of hard currency in the country, what is that related to?
Gemechu: That is not related to this. It’s not to say that it didn’t have any impact, but it is more related to the trade sector and the market’s condition.
Capital: There are some banks that have been given warnings and told to correct some things. Has there been a bank that has received actual punishment to make an example of them?
Gemechu: There is nothing like that on the banks. We always have a meeting and more than any other institutions, banks are more careful because to establish a relationship with a corresponding bank, the law needs to be implemented, if they don’t implement it, they can’t really establish relationships with foreign banks.
Sometimes, without knowing, they don’t report records of suspicious transactions and we have told them that they need to do that and they are, they are even providing trainings to their staff on this and other things.
Capital: You said it is smooth with the banks, so which sectors are vulnerable to this?
Gemechu: There are those that carry out money transactions without having a license from the National Bank. There will be serious consequences for them.
Capital: You have stated that a national risk assessment has been carried out. Why didn’t you want to make that public and when was the assessment done?
Gemechu: It is not about not wanting to make it public, a lot of time was taken to do the national assessment. We will make it public, it is a very important assessment, we will also provide trainings on that for relevant stakeholders. The national risk assessment looks into the country’s gaps in different areas.
What are the causes and the contributors to money laundering? These are things that we have identified. The assessment needs to be ratified and after that it will be revealed to all stake holders and help them protect themselves and their country based on the findings.