Preparing for Trade-Based Financial Risks Beyond CBE's Record Numbers

Jul 16 , 2026
By Nolawi Melakedingel

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Few financial institutions on the African continent have expanded their market presence with comparable speed or scale to the state-owned Commercial Bank of Ethiopia (CBE).

It plans to extend more than one trillion Birr in private-sector loans next fiscal year after reporting deposits of 2.4 trillion Br, more than 48 million customer accounts, and nearly half of the industry’s credit and foreign-currency inflows. Together, these figures point to a massive expansion in private-sector financing, cross-border trade and financial transactions over the coming years.

Much of the additional financing is likely to support manufacturing, agriculture, logistics, imports and exports. These are sectors expected to absorb a large share of the country's expanding private-sector credit.

As businesses expand across borders, banks would facilitate larger volumes of foreign exchange transactions and cross-border payments, increasing reliance on correspondent banking relationships, the gateways through which much of global commerce moves and where customer due diligence, sanctions screening and risk-based money laundering (AML) and terrorism financing (CFT) controls increasingly determine access to global financial networks.

Those cross-border financial flows are only one part of the picture.

International trade also depends on financial instruments that connect buyers, sellers and banks across multiple jurisdictions, creating an increasingly interconnected network of commercial documentation, financing and payments. As these networks expand, larger trade volumes inevitably generate more documentation, more counterparties and complex commercial relationships, the very conditions in which trade-based financial risks become harder to detect and manage.

This is typically the stage at which successful trading economies strengthen trade finance controls and improve inter-agency coordination to address increasingly sophisticated forms of trade-based financial crime.

Among the most notable of those risks is trade-based money laundering (TBML). Unlike conventional money laundering, this exploits legitimate commercial activity to move illicit value across borders through trade mispricing, manipulated documentation and opaque ownership structures.

TBML presents a different challenge from many other forms of financial crime because the underlying trade is often legitimate. Goods move, payments are made, and shipping documents appear legitimate. The illicit value lies in how invoices are priced, goods are described, ownership is structured, or transactions are layered across jurisdictions.

Because it is embedded within legitimate commerce, TBML is often difficult to detect. Its indicators are usually indistinguishable from legitimate commercial activity, making detection dependent on trade analytics and coordinated risk-based supervision rather than isolated compliance checks.

Recognising that complexity, the Financial Action Task Force (FATF) and the Egmont Group have identified TBML indicators spanning business structures, trade documentation, commodities, account activity, and transaction behaviour, reinforcing the point that payment monitoring alone is rarely sufficient.

For Ethiopia, these typologies are not entirely unfamiliar. Concerns over trade mis-invoicing, customs fraud, illicit financial flows, and the misuse of foreign exchange have featured in policy discussions for years, reflecting the challenges of managing international trade in a foreign-exchange-constrained economy. As trade and private-sector finance expand, the priority shifts from responding to past vulnerabilities to preparing institutions for a more complex trading environment.

In practice, the challenge is rarely a lack of regulation. More often, it is the ability to integrate customs intelligence, banking supervision, financial intelligence and corporate transparency into a coherent risk picture.

None of this argues against expanding private-sector credit. If the country's ambitions for industrialisation, export growth and private-sector development are realised, more sophisticated trade finance will naturally follow. Success also changes the questions policy makers should ask, one of which is whether the financial integrity system is evolving as quickly as the economy it is designed to support.

Across major trading economies, expanding trade finance has consistently been accompanied by stronger AML/CFT and counter-proliferation financing (CPF) frameworks, reflecting the growing complexity of cross-border commerce and the current need, globally, for more capable supervisory systems.

Singapore offers the clearest example. In 2025, its merchandise trade reached about 509.3 billion dollars, a scale that helps explain why trade finance supervision, public-private information sharing and AML/CFT controls became integral to its competitiveness as a trusted trading and financial centre.

Recognising these risks, regulators strengthened risk-based supervision and worked closely with financial institutions to improve trade finance controls without undermining commercial efficiency.

The Netherlands offers another lesson. Rotterdam handled 428.4 million tonnes of cargo in 2025 and 14.2 million TEU in container throughput, showing how large trade gateways require cooperation among customs, financial intelligence, tax authorities and financial institutions to detect trade-based financial crime.

The United Arab Emirates (UAE) adds a more recent example. Its rapid expansion as a trade, logistics and investment hub has brought stronger international expectations around beneficial ownership, sanctions compliance and AML/CFT effectiveness. FATF removed the UAE from increased monitoring in 2024, witnessing progress in strengthening its AML/CFT regime.

Their experiences differ in scale and context, but they point to the same conclusion. Stronger trade finance integrity has increasingly become part of sustaining trusted cross-border commerce rather than simply responding to financial crime.

Ethiopia's circumstances are, of course, distinct. But the direction is clear. If private-sector lending expands into manufacturing, logistics, imports and exports, the financial system will not be limited to processing more credit but also to invoices, customs declarations, letters of credit, foreign exchange requests, cross-border payments, and ownership structures. That is where TBML risks become harder to detect and more important to manage.

Seen through that lens, CBE's latest performance tells a story beyond record deposits and the planned expansion in private-sector lending. It marks a new phase of financial intermediation, one in which expanding access to finance should be matched by stronger trade data analysis, beneficial ownership transparency, customs-bank-FIU cooperation, and coordinated risk-based supervision.

This expansion in private-sector financing has the potential to support Ethiopia's deeper integration into regional and global trade. Sustaining that progress, however, will depend on ensuring that the trade finance supporting it remains resilient to trade-based money laundering.

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PUBLISHED ON Jul 16,2026 [ VOL 27 , NO 1367]

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