Financial Crime World

Malawi’s Financial Sector: Banks Dominate, But Challenges Remain

============================

Malawi’s financial sector is dominated by banks, which account for two-thirds of the total assets. The country’s banking system offers a wide range of products and services, with deeper connections to the international financial system compared to other Financial Institutions (FIs) and Designated Non-Financial Businesses and Professions (DNFBPs).

Money Laundering and Terrorism Financing Risks

The report highlights the risks associated with money laundering (ML) and terrorism financing (TF). Malawi is considered to be at higher risk of ML, particularly in industries such as:

  • Real estate
  • Stones and precious metals
  • Lawyers
  • Accountants

However, the country faces lesser TF risks, primarily related to foreign nationals from high-risk jurisdictions.

Efforts to Combat Financial Crimes

Since its last mutual evaluation in 2008, Malawi has taken steps to strengthen its anti-money laundering and combating the financing of terrorism (AML/CFT) system. Key institutional changes include:

  • Re-establishment of the Fiscal and Fraud Unit within the Malawi Police Service
  • Strengthening of powers of the Financial Intelligence Authority

Challenges Remain

Despite progress made, Malawi still requires significant improvement in areas such as:

  • Oversight of non-profit organizations
  • Cross-border wire transfers
  • Transparency of legal persons and arrangements

The country’s AML/CFT system is effective in some areas, including:

  • ML/TF risk assessment and understanding
  • Investigation and prosecution of predicate offenses
  • Use of financial intelligence

Coordination and Policy Setting

Malawi has demonstrated a good understanding of its ML risks, with the private sector showing varying levels of awareness. The country’s authorities have also shown a fair understanding of TF risks, particularly from:

  • Financial Intelligence Authority (FIA)
  • Reserve Bank of Malawi (RBM)
  • National Intelligence Service (NIS)

However, there is need for a more comprehensive approach to ML/TF risk assessments in some areas.

Financial Intelligence and Coordination

The Financial Intelligence Authority (FIA) is responsible for:

  • Receiving, requesting, analyzing, and evaluating reports
  • Disseminating financial intelligence to law enforcement agencies

The FIA has autonomy and operational independence to perform its core functions.

Malawi’s national AML/CFT policy and strategy are coordinated by the Ministry of Finance, Economic Planning and Development, with the National AML/CFT Committee serving as an advisory body. While coordination at the operational level appears effective, competent authorities face inadequate resources to prioritize and mitigate identified higher risks.

Conclusion

Malawi’s financial sector is dominated by banks, but challenges remain in combating ML and TF. The country has made progress in strengthening its AML/CFT system, but further improvements are needed in areas such as oversight of non-profit organizations and transparency of legal persons and arrangements. Effective coordination and resource allocation will be crucial in mitigating identified risks and promoting a safe and secure financial system.