Insiders and officials allege that foreign money transfer agents operating in the illicit offshore market exploit Ethiopian banks as complicit “rubber stamps” to offer Ethiopian migrants and diasporas high premiums that deter billions of dollars in potential remittances from reaching the country’s economy.
Receipts and bills obtained by The Reporter show that Hawala firms offer 105 birr per U.S. dollar. Even the hawala companies with established relationships with regional commercial banks transfer remittances from the diaspora to Ethiopia using the exchange rate from the parallel market. The amount is twice as much as the official exchange rate
The bills indicate that the majority of wired birr are deposited at the Commercial Bank of Ethiopia (CBE) at a rate of 105 birr per US dollar. One of the companies that issued the bills is Ria, a money transfer company.
However, CBE officials said the transaction occur without their knowledge and there is no way for them to trace it back.
“They might send via CBE, but that does not mean CBE is involved. The foreign currency is not coming to CBE,” responded Abie Sano, president of CBE, when asked by The Reporter about the bills in which CBE is mentioned as the “paying agent.”
The customer experience department of CBE also reported that Hawala companies are keeping the remittance in hard currency and depositing the equivalent amount in birr to CBE account holders. They deny, however, that CBE is part of the illegal scheme that Hawala companies are pulling.
Although CBE management and experts are aware of the illegal activities, central bank officials are not taking action against the Hawala companies conducting illegal transactions.
“Basically, we introduce the daily exchange rates. We do not engage in operational issues with financial institutions. We presume all commercial banks use the official exchange rate determined by the central bank. We have no information regarding such illegal activities,” Yenehassab Tadesse, director of foreign exchange monitoring and reserve management at the NBE, told The Reporter.
There are about 20 remittance companies operating in Ethiopia that have NBE recognition and work with commercial banks. Western Union has a substantial market share, but Money Gram, Express Money, Dahabshill, and Riya are also well-known.
At the time of publication, attempts to obtain a response from the remittance companies were unsuccessful as they failed to respond to an email request.
An insider, a manager at a money transfer company operating in Ethiopia, alleges that “all remittance transfer agents working with Ethiopian banks have corrupted officials in Ethiopia’s financial industry and commercial banks as well as the central bank.”
The source claims these international money transfer companies divert billions of dollars annually to the black market. The hard currency gathered from the Ethiopian diaspora abroad is redirected to Dubai, China, and other offshore accounts, according to the insider, where it is sold for Ethiopian importers at the black market exchange rate.
An anonymous executive at a private bank said, “We frequently see bills showing that remittance companies are officially exchanging US dollars for 105 birr, which indicates diversion of funds.” The manager added that the remittance companies “mainly send funds via CBE.”
The executive stated: “It is confusing. A third parallel market seems to be emerging – almost officially.” This implies corruption and illegality within Ethiopia’s financial system, allowing foreign money transfer agents to circumvent regulations.