Reserve Bank of Malawi Issues Guidelines for Financial Institutions to Combat Money Laundering and Terrorist Financing
The Reserve Bank of Malawi has issued guidelines for financial institutions (FIs) to identify, assess, and manage money laundering (ML) and terrorist financing (TF) risks. The guidelines aim to ensure that FIs have effective policies and procedures in place to prevent the misuse of their services for illegal activities.
Policies and Procedures
Financial institutions must develop and implement policies and procedures to control identified inherent risks. This includes:
- Identifying specific products, services, customers, delivery channels, and geographic locations that pose a ML/TF risk to the FI
- Developing policies and procedures to manage these risks in line with the FI’s acceptable risk appetite
Risk Assessment
The guidelines require FIs to carry out ongoing risk assessments to remain effective. This includes:
- Updating risk assessments periodically, at least yearly, to take into account dynamic changes to risk levels
- Considering new products offered, new markets entered, high-risk customers closing or opening accounts, and changes to FI products, services, policies, and procedures
Products and Services Risk
The level of exposure to ML/TF risk varies depending on the nature of a FI’s products and services. High-risk products and services include:
- Electronic funds payment services
- Electronic banking
- Deposit products
- Foreign exchange
- Trust and asset management services
Customers Risk
FIs must use sound judgment to determine the level of risk for each customer, considering factors such as:
- Geographical location
- Services sought
- Nature of business or occupation
- Anticipated transaction activity
High-Risk Customers
Certain customers may pose a high level of risk to FIs, including:
- Foreign financial institutions
- Non-bank financial institutions
- Casinos
- Brokers/dealers in securities
- Dealers in precious metals, stones, or jewels
- Second-hand motor vehicle dealers
Compliance Programs
FIs must have compliance programs that include:
- Reviews of relevant policies and procedures
- Risk assessment processes
- Training programs
- Annual internal or external audits to evaluate the effectiveness of these programs
The guidelines emphasize the importance of effective risk management and compliance for FIs to prevent ML/TF risks and maintain public trust in the financial system. FIs are expected to demonstrate their assessment of ML/TF risks to other stakeholders, including supervisors, law enforcement agencies, and relevant authorities.