Financial Crime World

Uncovering Fraudulent Activities: Front Companies Used to Distance Criminals from Illegal Proceeds

The Financial Intelligence Unit (FIU) relies on Suspicious Transaction Reports (STRs) and Large Currency Transaction Reports (LCTRs) received from financial institutions to uncover syndicates and irregular activities in government. Two recent cases of fraud highlight the brazen methods used by criminals to distance themselves from illegal proceeds.

The “Cashgate” Scandal

In 2013, a group of officials in Lilongwe’s Ministry of Finance colluded with ICT personnel to steal government funds. They would upload fake funding and generate payments, which they would then delete from the Integrated Financial Management System (IFMS) server. The scheme was uncovered when the system suppliers traced deleted transactions through a remote backup server.

The FIU has observed a new trend where individuals start up businesses with similar names to existing organizations or businesses with the intention of diverting cheques. In one case, an individual registered a business called “Mzanti Technologies” with a similar name to a trendy technological company in Blantyre.

Red Flags

Here are some common red flags that can indicate fraudulent activities:

  • Registration of a business name similar to an existing organization or business: This can be a sign that someone is trying to distance themselves from illegal proceeds by creating a shell company.
  • Opening an account at a bank without proper documentation: This can indicate that the individual does not want to leave a paper trail.
  • Large cash transactions or deposits: Unusual large cash transactions or deposits can be a sign of money laundering or other fraudulent activities.
  • Alterations on cheques or deposit slips: Forging deposit slips and bank stamps is a common tactic used by fraudsters to dupe employers.
  • Unusual delays in processing payments or cheques: If there are unusual delays in processing payments or cheques, it can be a sign that someone is trying to stall the payment process.

Prevention is Key

The FIU is urging citizens to remain vigilant and report any suspicious transactions or activities to help prevent these crimes from occurring. By being aware of these red flags and reporting any suspicious activity, we can work together to reduce fraudulent activities and protect our financial systems.