On January 9, 2025, the Ethiopian Parliament enacted Asset Recovery Proclamation No. 1364/2025 by majority vote, and it entered into force upon its publication in Negarit Gazeta on 2 May 2025. This legislation sparked significant debate due to its retroactive application extending up to Ten years, its investigative methods, and the reliance on the civil standard of proof in legal proceedings.
This proclamation was enacted to create a robust legal framework aimed at preventing and mitigating the harmful effects of economic crimes on the nation’s economy includingan unexplained asset that has a negative impact on the country’s tax system, foreign currency, financial flow and foreign direct investment. Further the proclamation also aims to address the lack of compressive legal framework on asset recovery and to establish a legal framework aligns with the standards set forth in international agreements ratified by Ethiopia on asset recovery.
This legal insight highlights the content of the new proclamation and major legal concepts provided in this proclamation including the scope of application and theprocedures as to asset identification, investigation, freezing, seizure, burden of proofand confiscation
Asset and Asset Recovery Meanings
The proclamation defines asset as any movable, immovable, money, tangible or intangible assets including legal instruments in any form evidencing title to or interest in such assets such as bank credits, traveler’s cheques, bank cheques, money orders, virtual asset, securities, shares or bonds or any other document similar to that and includes interest, dividend or other income or value generated by such assets. On the other hand, asset recovery is defined as identification, tracing, freezing, seizure, investigation, asset management and confiscation of assets obtained through or related to crime or unexplained asset.
The proclamation offers a broad definition that encompasses a wide variety of assets, with a notable advancement being the inclusion of virtual assets. These are digital representations of value that can be traded, transferred, and used for payment or investment purposes. This addition is designed to counter the growing trend of digital currencies, ensuring that assets obtained through criminal activity or left unexplained, even when held in digital form such as crypto currencies can be effectively confiscated.
Scope of Application
The Asset Recovery proclamation applies to both natural person (individuals) and legal person (organizations) in which Ethiopia has jurisdiction to prosecute. But exceptionallythe proclamation does not apply for Legal Person including Government institutions,Religious, political and internation organizations.
Another important aspect to be noted regarding the scope of application is the specific areas to which the proclamation applies. The proclamation is applicable to assets acquired through criminal activities and assets classified as unexplained assets. Assets acquired through criminal activity include both assets, asset used as instrumentality of a crime and proceed (fruit) of a crime. Unexplained assets are assets or a lifestyle that significantly exceeds the legitimate income derived from lawful activities, for which the owner cannot provide a satisfactory explanation. For unexplained assets, claims may be filed for assets acquired within 10 years prior to the effective date of the proclamation. For such retroactive claims, the total value of unexplained assets at the time of acquisition must have been at least 10 million birrs.
Grounds For Investigation
Under this proclamation, a person can be investigated or prosecuted for possessing unexplained assets under two main circumstances. The first occurs when a person, either directly or indirectly controls assets or maintains a lifestyle that is clearly disproportionate to their legitimate income from current or previous employment or other lawful sources and there exists a reasonable suspicion of a crime. In this case, a key requirement is the existence of reasonable suspicion of criminal conduct. However, the law does not clearly define what constitutes reasonable suspicion which may lead to ambiguity in its application.
The second circumstance applies even in the absence of reasonable suspicion of a crime. This applies to person who have no legally registered source of income or who are exempt from tax obligations due to low income, yet control assets or live in a way that exceeds what their known income could support. For example, such individuals may own property or valuable assets without having a valid business license, employment record, or tax history to justify their wealth. In this situation, authorities may investigate or take legal action based solely on the disparity between income and lifestyle and the individual is expected to prove the lawful origin of their assets.
Asset Tracing
An asset recovery investigation is initiated by the public prosecutor or investigator when there is evidence or reliable information from law enforcement, financial institutions, whistleblowers, or when there is sufficient independent reason to start the investigation. The investigator or public prosecutor can employ two investigation techniques, General investigation and special investigative method. The special investigation technique includes monitoring bank accounts, accessing computer systems, networks and servers, intercepting communications, taking audio or video recordings and conducting undercover operations. Unlike the general investigation method, the special investigation method requires the investigator to obtain prior permission either from the Court or from The Minister of Justice or the head represented by the Minister.
Following the initiation of an investigation and the collection of preliminary evidence, the prosecutor or investigator, during the pretrial phase formally requests any person to disclose in writing the details of their assets and the means by which they were acquiredalong with supporting legal evidence. This disclosure must be provided within two months. However, in compelling circumstances the person may request an extension forup to six months. The person is legally obligated to respond within the specified period, accompanied by adequate supporting evidence. Any self-incriminating evidence provided during this disclosure process cannot be used against the person in criminal proceedings. However, this protection does not apply if the person attempting to justify the asset submits forged or falsified documents. Furthermore, the provision does not prevent prosecutors from establishing a criminal offense through other legally obtained evidence. If the person fails to comply within the designated timeframe, the prosecutor can apply the case to the court presuming that the property is unexplained wealth.
Furthermore, anyone who refuses to provide evidence when requested can face imprisonment for one to three years, along with a court order to disclose the evidence. Those who hide, falsify, destroy, or breach the confidentiality of requested evidence can be punished with imprisonment ranging from three to five years. Additionally, anyone who violates court orders related to freezing, seizure, confiscation or asset management will be fined 10% to 15% of the damage caused or benefits gained and can also be sentenced to simple imprisonment for one to three years. If a legal entity (such as a company) violates such orders, the fine increases to between 20% and 30%.
Standard and Burden of Proof
Asset recovery and confiscation proceedings operate under the civil standard of proof, requiring a preponderance of evidence to establish claims. Evidence obtained during criminal investigations or proceedings is admissible in asset recovery cases, and upon a criminal conviction, such evidence is considered final for asset recovery purposes, eliminating the need for re-evaluation. Furthermore, parties can introduce additional evidence not previously presented in the criminal process.
Moreover, the burden of proof shifts to the accused, who must demonstrate to the court’s satisfaction the legitimate acquisition of any unexplained assets. This reversal places significant responsibility on individuals to justify their wealth.
Freezing or Seizure
The Proclamation allows the prosecutors or investigators to request a court order to freeze or seize assets under certain circumstances. These include situations where an investigation is ongoing, charges have been filed, a conviction has been secured, or there is sufficient reason to believe the asset is connected to unlawful activity.Moreover, in addition to the property in the name of the accused or the suspect, an application can be submitted for the freezing or seizure of proportional value of the asset in the name of the spouse, the partner under irregular union, the children and any person’s asset suspected to have connection with the proceeds or instrumentalities of the crime.
In urgent cases when it’s believed that the assets might be squandered or the economic value of the asset may vanish, the Minister of Justice or a delegated official can issue a temporary freezing order lasting up to three working days to prevent the asset from being hidden or losing value. If a court application is not submitted within this period, the freeze is lifted. However, if the case is taken to court on time, the freeze remains in effect until a decision is made. The court is expected to decide within 15 days of the date of application.
Even though The Proclamation allows the prosecutors or investigators to request courtorder to freeze or seizure not all assets are subject for freezing or seizure. Certain types of assets are legally protected from such measures to ensure the basic rights and well-being of individuals and their families are respected. Courts may not give freezing or seizure orders on the tools essential for the suspect’s, accused, or their dependent family members’ daily livelihood or professional work, household appliances, as well assuch amount of money or assets necessary for the daily life of the suspect, the accused or his family for a maximum of one year or for a period determined by the court on exceptional circumstances. However, this protection does not apply if the prosecutor or the investigator indicates that such assets are the proceeds of crime. Additionally, items made from precious metals, high-value artisan souvenir,s and artifacts may still be subject to freezing or seizure.
Asset Confiscation
Asset confiscation refers to the permanent deprivation of ownership rights over an asset. It can occur in two forms: Conviction-Based Confiscation, which follows a criminal conviction, and Non-Conviction-Based Confiscation, which applies even in the absence of a criminal conviction. Furthermore, the proclamation includes bargaining provisions in asset confiscation. The Ministry of Justice is empowered to issue a directive outlining the conditions under which individuals can enter into a negotiated agreement to return unlawfully obtained assets and to provide compensation for any damage caused to another’s property. Assets subject to confiscation includeunexplained assets and those derived from criminal activity, intermingled with illicit funds, or exchanged for such proceeds, as well as instrumentality of crime and income or benefits generated from them.
The Proclamation also introduces the principle of joint and several liability in asset confiscation. This means that when multiple individuals are involved in a crime and a confiscation claim is brought, each co-offender can be held responsible for the full value of the damage or for the undue advantage obtained not just their portion. If it’s not possible to recover enough assets from each person individually, the law allows the government to confiscate the entire amount from one or more of them. A person who pays more than their fair share of the confiscated asset has the legal right to recover the excess amount from the other responsible parties through subrogation.
Additionally, if a new asset connected to a crime is found either before or after the court has made a final confiscation decision, the prosecutor can submit a new request to confiscate that asset. The court will accept the new request if it confirms that the asset was not known during the original application or if there is another valid reason.
The proclamation also outlines how individuals can challenge both the application and the court’s decision on asset confiscation. To successfully contest a confiscation, the claimant must convince the court that they had no knowledge of the asset’s criminal origin and that they acquired it either by paying a fair price or by providing services of equal value at the time of the transaction. However, if a legal arrangement is found to have been made for the purpose of evading confiscation, the court has the authority to invalidate it. In such cases, if the party who acquired the asset acted in good faith and provided value in return, they are entitled to reimbursement but only for the actual amount they paid from the confiscated assets.
The Implication of the Asset Recovery Proclamation on Business and Third Parties
Asset recovery proclamation has a significant effect on businesses and third parties by increasing the scrutiny of financial transactions and asset ownership. Companies, particularly in the banking and investment sectors, are now subject to stricter compliance measures, facing the potential for asset freezes or seizures if any connection to criminal activities is established. Such situations could interrupt business operations, harm reputations, and discourage foreign investment. Third parties, including unsuspecting individuals or organizations, might forfeit assets if they fail to demonstrate lawful acquisition, even if they were unaware of the assets’ illegal origins. Further the proclamation mandates cooperation in investigations, increasing legal and financial risks for those involved in property transactions or asset management.
Moreover, the special investigation methods introduced under the proclamation have broad implications. Businesses in the financial and digital arenas are subject to enhanced oversight through techniques such as bank account monitoring, digital surveillance, and controlled delivery, which place every transaction and communication under rigorous review. Third parties like suppliers, customers and service providers might inadvertently become entangled in these investigations, potentially exposing sensitive information and incurring reputational damage. While these measures aim to deter criminal activity and boost transparency, they also present challenges in balancing regulatory enforcement with the preservation of privacy and operational efficiency.
Although the proclamation enhances Ethiopia’s legal structure concerning economic offenses and corruption, it introduces some unpredictability. Companies and external parties should focus on thorough due diligence to steer clear of legal conflicts or the risk of asset seizure or confiscation.
Conclusion
The Asset Recovery Proclamation No. 1364/2025 represents a significant step in Ethiopia’s efforts to combat economic crimes and unexplained wealth, aiming to strengthen the country’s financial systems and align with international standards. By introducing stringent measures for asset tracing, freezing, seizure, and confiscation, the proclamation enhances transparency and accountability, particularly in sectors like banking and investments. However, its broad scope, retroactive application, and reliance on civil standards of proof raise concerns about potential misuse and the impact on businesses and third parties, including innocent individuals who may face asset forfeiture. While the proclamation fosters a more robust legal framework against corruption, its implementation must balance rigorous enforcement with fairness to avoid discouraging investment and economic growth. Ultimately, the success of this legislation will depend on its judicious application, ensuring it achieves its goals without undermining trust in the legal and economic systems.
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