Key points;
● 11 2 arrests and 519 accounts frozen nationwide.
● Cryptocurrency is often used as a major tool to evade regulations
● The parallel market has severely drained Ethiopia’s foreign exchange reserves.
● Crackdown supports IMF-backed economic reforms.
Ethiopia has launched one ofits most sweeping financial crime crackdowns in years, arresting 11 2
suspects and freezing 519 bank accounts in early November 2025. The coordinated nationwide raids
led by the National Intelligence and Security Service (NISS) together with the Financial Security
Service, federal police, and regional agencies targeted a sprawling underground network accused of
running unauthorised remittance channels, black-market currency trades, and covert crypto-based
transfers. With both Ethiopian and foreign nationals implicated, including several Chinese suspects,
the operation highlights the international reach ofthese illicit schemes at a time when Ethiopia is
battling severe foreign-exchange shortages. Authorities say the crackdown aims to protect the formal
financial system, which has been strained by years ofcurrency instability, parallel market pressures,
and dwindling reserve buffers.
Months of intelligence gathering uncovered how these illicit networks operated with remarkable
sophistication. Authorities found that the groups relied on forged trade documents, shell
import–export companies, encrypted messaging apps, unlicensed mobile payment tools, and offshore
agents to move money in and out ofthe country. Functioning much like an informal hawala system,
these networks allowed clients overseas to send funds that were then paid out in Ethiopia in birr
bypassing official banks entirely. This shadow system thrived on the significant gap between the
official and black-market exchange rates, enabling operators to profit while depriving Ethiopia of
badly needed foreign currency inflows. Officials argue that these practices not only deepened the
country’s forex crisis but also contributed to money laundering, tax evasion, and widespread capital
flight at a time when economic stability is already fragile.
A notable element ofthe crackdown is the role ofcryptocurrency in these covert operations. Despite
Ethiopia’s 2022 ban on crypto transactions and its insistence that only the birr is legal tender,
underground usage has grown as a workaround for acquiring foreign currency. Some ofthe arrested
suspects reportedly used crypto platforms and digital wallets to obscure transactions, convert funds,
and settle accounts outside the banking system. The operation also followed a months-long campaign
by the National Bank ofEthiopia (NBE), which issued sharp warnings to diaspora communities and
named several U.S.-based unlicensed remittance operators accused offacilitating illegal transfers.
These earlier actions signalled the government’s intent to dismantle informal channels that had
become increasingly attractive due to slow banking procedures and restrictive forex policies.
The timing ofthese actions is closely tied to Ethiopia’s broader reform ambitions. Under a multiyear
IMF program, the government has implemented measures to reduce inflation, improve forex
management, and correct exchange-rate misalignment. By mid-2025, these reforms had begun to
show results: inflation eased significantly, the birr moved closer to market value, and the
parallel-market premium shrank to roughly 15%, its lowest level in years. Officials argue that
bringing illegal financial flows under control is essential to sustaining these reform gains. Every dollar
sent through informal channels represents a lost opportunity to rebuild foreign reserves, pay for
critical imports, and strengthen macroeconomic stability. Estimates suggest the networks dismantled
in November alone may have processed more than $50 million in unrecorded transactions a
substantial sum for an economy facing chronic forex constraints.
Looking ahead, Ethiopia’s challenge is to strike a balance between hard enforcement and deeper
structural improvements. While NISS vows to continue dismantling illicit networks, the government
also recognises that durable progress depends on reducing the incentives that push individuals and
businesses toward the parallel market. Efforts to expand official forex supply, streamline banking
services, modernise digital payments, and continue aligning exchange-rate policy with market
dynamics will be key to closing the space in which informal networks operate. The November
crackdown marks a decisive moment in Ethiopia’s financial reformjourney one that pairs
security-driven enforcement with an evolving effort to build a more efficient, transparent, and resilient
financial system capable of supporting long-term growth.
