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Financial Institutions Must Implement Robust Anti-Money Laundering and Combating the Financing of Terrorism Measures

The Reserve Bank of Malawi has issued guidelines for financial institutions (FIs) to implement effective anti-money laundering (AML) and combating the financing of terrorism (CFT) measures.

Implementation Requirements

According to the guidelines, FIs must:

• Develop and implement policies and procedures to control identified inherent risks.
• Document and communicate ML/TF risk assessments to relevant business lines, the Board, and all relevant staff.
• Have compliance programs in place, which include:
  • Reviewing relevant policies and procedures
  • Risk assessment processes
  • Training programs
• An internal or external auditor must conduct this review annually.

Identifying High-Risk Products and Services

The guidelines identify specific products, services, customers, delivery channels, and geographic locations that pose a higher risk of ML/TF. These include:

• Electronic funds payment services
• Electronic banking
• Foreign exchange
• Trade finance or letters of credit

Customer Risk Assessment

FIs are also required to assess the level of risk posed by each customer, taking into account factors such as:

• Nature of business
• Occupation
• Anticipated transaction activity

Ongoing Risk Assessments

The guidelines stress the importance of ongoing risk assessments, which should be updated at least yearly to take into account dynamic changes to risk levels.

Key Requirements

Here are the key requirements for financial institutions:

• Develop and implement policies and procedures to control identified inherent risks
• Document and communicate ML/TF risk assessments to relevant stakeholders
• Have compliance programs in place, including annual reviews by an internal or external auditor
• Identify specific products, services, customers, delivery channels, and geographic locations that pose a higher risk of ML/TF
• Assess the level of risk posed by each customer
• Conduct ongoing risk assessments, updated at least yearly

Products and Services with Higher ML/TF Risk

Some products and services that pose a higher risk of ML/TF include:

• Electronic funds payment services
• Electronic banking
• Foreign exchange
• Trade finance or letters of credit
• Lending activities, particularly loans secured by cash collateral and marketable securities
• Account services such as non-deposit investment products or insurance products that allow large one-time or regular payments

Customers with Higher ML/TF Risk

Some customers that pose a higher risk of ML/TF include:

• Foreign FIs, including financial institutions and foreign money services providers
• Non-bank financial institutions such as:
  • Money services businesses
  • Casinos
  • Brokers/dealers in securities
  • Dealers in precious metals, stones, or jewels