Central Bank slam banks over shell bank involvement

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The central bank has accused some banks on the tendency to work with shell banks.
The investigation of National Bank of Ethiopia (NBE), which recently imposed restriction on money transfer from account to account to only five individuals or entities in a week, shows that massive transfer occurred within a very short period.
NBE, the financial sector regulatory body, has also ordered banks to terminate their business relation with 64 individuals and an institution.
The investigation of the central bank shows that an individual has conducted thousands of suspected transactions.
It has also identified millions of birr frequently credited or debited from individuals account.
For instance an account holder at Togochale Branch of unstated bank transaction frequency was 1,048 times and the debited amount was over 139.4 million birr within a short period of time.
Meanwhile, some of the investigation document does not quite mention the exact period since most of the investigation covers the first three months of the financial year that started on July 2020.
Similar frequent transaction with the debited of tens of millions birr was mentioned of the investigation that complied different annexes.
Under the information on saving account holders, undertaking multiple account to account transfer transaction started on July 1 to September 30, 2020. The NBE stated the maximum transaction an individual conducted was 4,947, while in the stated period a maximum of 482 daily transactions conducted by a single individual. Similar massive individuals’ transaction has been mentioned on the annex and tables that NBE filed to the investigation for Federal Police Commission.
Most of the accounts and bank branches included in the investigation is the eastern part of Ethiopia, which is the major contraband and illegal money transaction hub and Addis Ababa.
The central bank has also ordered banks to terminate their business relations with the individuals that are suspected on money laundry and or contraband.
The circular that was signed by Solomon Desta, Vice Governor of Financial Institutions Supervision, and issued on January 22 stated that NBE is entrusted with the mandate of supervising compliance of financial institutions with provisions of the proclamation (Prevention and Suppression of Money Laundering and Financing of Terrorism Proclamation No. 780/2013) and the directive (Financial Anti-Money Laundering and Countering the Financing of Terrorism Compliance Directive No. 01/2014) and imposed appropriate measures and sanctions.
“The national bank has come to learn, from its normal supervising and monitoring activities that some banks are not strictly complying with the requirements of the proclamation and the directive in terms of conducting customers due diligence. Moreover, there has been a tendency by some banks to work with shell banks (entities with no license that do financial services in Ethiopia),” the circular reads.
It warned that these flaws, if not rectified swiftly, will have direct consequences on the safety and soundness of the financial institutions so to speak, and thus need to be addressed in no time.
It added that accordingly notwithstanding other legal actions that may be taken by law enforcement organs under the proclamation article 22 and 37 of the directive it has instructed banks immediately terminated the business relation with the customers that it attached and notify other customers, who are reasonably suspected of engaging in suspicious transaction.
Since the beginning of demonetization, mid-September 2020, the central bank has imposed a total of restriction on depositing money on behalf of another account.
However, transferring from account to account that can be undertaken directly by visiting bank branches or technology based was not restricted until this Friday.
On December 8, NBE has issued a circular to all banks under the subject ‘limits on one to multiple accounts transfer.’