Ethiopian Capital Market Authority Taps into INSA, Al, Digital ID for Technological Support

The Ethiopian Capital Market Authority (ECMA) has partnered with the Information Network Security Administration (INSA), the Ethiopian Artificial Intelligence Institute, and the National ID Project Office to strengthen its technological infrastructure and safeguard investors’ interests.

This collaboration, signed today, February 29, 2024, encompasses support related to cybersecurity, transaction protocols, infrastructure, data protection, and personal data theft and aims to enhance the Authority’s ability to monitor the market and foster confidence.

“The foundation of capital market operations rests on technology. The system must be safeguarded against crimes and frauds, and there is a need to commence preparations ahead of the launch of the capital market,” stated Dr. Brook Taye, the Director General of the Ethiopian Capital Market Authority.

“Information sovereignty is primary and INSA will be supporting us in this road,” he added.

According to Tigist Hamid, Director General of INSA, the agency’s digital forensic department has been collaborating with security forces in investigating cybercrimes thus far. “Security audits and clearances on devices and software used by ECMA, as well as cyber protection, will be some of our work,” said Tigist.

The integration of AI into ECMA’s operations is another step ECMA is taking towards modernizing the capital market. Globally, capital markets are being aided by AI as the technology continues to evolve on a day-to-day basis.

“Our institute is working across all sectors, including the financial sector. The collection and processing of data are crucial in capital markets. This is an area where AI can be deployed to make better data-driven decisions. We are ready to support and provide training for ECMA,” said Worku Gacneha, Director General of the Artificial Intelligence Institute.

Furthermore, ECMA is opting to use Digital ID as the primary identification method for retail investors participating in the capital market. A mandatory requirement is expected when Digital IDs are widely adopted.

“Digital ID can provide KYC for ECMA. If retail investors are linked with Fayda Number, we can easily determine the parties involved in the transaction,” added Yodahe Zemichael, the Executive Director of Ethiopia’s National ID Program.

Ethiopia is on track to launch its stock market in 2024. Last month, ECMA achieved a significant milestone by announcing the official registration of capital market players, after the the approval of the Capital Market Service Providers Licensing and Supervision Directive.

This directive establishes a legal framework governing all aspects of the capital market, including licensable activities and the responsibilities of licensed service providers

In addition to its technology alliance, ECMA has also established the Capital Market Integrity Task Force, comprising key stakeholders including the Ministry of Justice, Financial Intelligence Services, Ministry of Trade and Regional Integration, and the Federal Police Commission.

The task force aims to identify, investigate, and prosecute illegal activities in the market, ensuring orderly operations and investor protection.

“The main reason for establishing such a task force is that capital market crimes inherently put millions of birr at risk and require significant time for investigation. Given that the capital market is relatively new, we also need new skills and systems to combat such crimes,” said Brook.

The task force has stated that it’s paying attention to share-selling advertisements and has added that some companies are airing exaggerated commercials, highlighting the need to protect investors.

The task force will be responsible for identifying and bringing to justice companies and promoters engaged in deceptive and illegal share-offering practices that result in investors losing their money.