Despite the need for enhanced due diligence on Politically Exposed Persons (PEPs), reluctance continues to challenge KYC compliance in Ethiopia’s financial sector.
The Commercial Bank of Ethiopia (CBE) asserts that it has bolstered its compliance measures in accordance with regulatory standards. However, during the 4th KYC Compliance Day celebration at CBE headquarters, the National Bank of Ethiopia (NBE) pointed out ongoing difficulties in meeting compliance requirements, despite continued improvement efforts.
An NBE representative presenting a study on the matter noted that one of the major obstacles to effective KYC implementation is the difficulty in keeping PEPs lists current. “Banks, including CBE, struggle to maintain an up-to-date PEPs list,” he remarked, urging that “relevant authorities should regularly provide banks with updated PEPs lists.”
Additionally, a lack of cooperation from PEPs when banks request further information poses another significant challenge, despite their legal obligations to comply.
PEPs, who are individuals that hold or have held prominent public positions, present heightened risks of corruption and money laundering, which necessitate stricter scrutiny by financial institutions.
The NBE representative also identified several systemic challenges, including the absence of a centralized national ID system, a lack of accessible databases for legal entities, poor integration among government agencies, insufficient stakeholder cooperation for enhanced Customer Due Diligence (CDD), limited investment in KYC technology, a weak focus on compliance units, and high operational costs.
Under the theme “The Future of KYC: Powered by Innovation,” CBE President Abie Sano stressed that compliance with regulatory laws is vital for protecting the financial sector.
Firew Gebreselassie, CBE’s Vice President of Risk Management and Compliance, reported significant progress in compliance over the past four years, noting that the bank has strengthened its processes in alignment with regulatory standards.
The NBE conducts regular assessments through both onsite and offsite examinations to ensure KYC compliance. “We are approaching full compliance, though this remains an ongoing journey. Our policy is zero tolerance for noncompliance,” Firew stated.
To enhance compliance, CBE has implemented several technological solutions, including the Financial Crime Mitigation Solution, which screens clients, including local and international PEPs, and links to global sanction lists (UN, EU, OFAC, UK); NG Screening for Profiling, which helps assess customers’ creditworthiness and risk profiles; and the Analytic x Boutique (NFRM System), which aids in risk mitigation.
“With 43 million customers, technology is crucial to our operations, and we continually upgrade our systems,” Firew added.
Despite these advancements, Ethiopia’s financial sector still faces challenges in achieving full KYC compliance, particularly concerning PEPs and systemic inefficiencies.
