Financial Crime World

Malawi’s Financial Sector: A Mixed Bag in Combating Money Laundering and Terrorism Financing

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Lilongwe, Malawi - The financial sector in Malawi plays a crucial role in the country’s economy, with banks accounting for two-thirds of the total assets. Banks offer a wide range of products and services, and have deeper connections with the international financial system than other financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs).

AML/CFT Efforts

Malawi has made significant progress in combating money laundering (ML) and terrorism financing (TF) since its last mutual evaluation in 2008. The government has enacted new laws and strengthened its institutional framework to have a more robust Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) system.

  • Key changes include:
    • Re-establishment of the Fiscal and Fraud Unit within the Malawi Police Service
    • Strengthening of powers of the Financial Intelligence Authority
    • Establishment of a National Counter-Terrorism Panel
    • Completion of a national risk assessment in 2018

Oversight and Coordination

While Malawi has made progress in AML/CFT efforts, there are still areas that require improvement. The country needs to:

  • Strengthen oversight of non-profit organizations (NPOs)
  • Improve cross-border wire transfers to combat externalization of currency
  • Enhance transparency of legal persons and arrangements, including understanding the risk of misuse

Malawi has implemented an AML/CFT system that is effective in some areas, such as ML/TF risk assessment and investigation. However, many Financial Institutions, DNFBPs, and competent authorities are still in the early stages of developing and implementing policies, procedures, and processes to take into account the new framework and results of the 2018 NRA.

Challenges Ahead

Malawi faces challenges in effectively investigating, prosecuting, and confiscating proceeds of crime due to:

  • Lack of adequate resources
  • Need to improve risk-based supervision of non-bank FIs and DNFBPs
  • Compliance with preventive measures

The authorities have a relatively good national and international coordination system, but there is still a need to:

  • Improve handling of mutual legal assistance (MLA) and extradition matters by having a proper case management system
  • Keep beneficial ownership information up-to-date

Conclusion

Malawi’s financial sector plays a crucial role in the country’s economy, and it is essential that the government continues to strengthen its AML/CFT efforts to combat ML and TF risks. While there are areas that require improvement, Malawi has made significant progress since its last mutual evaluation, and with continued effort, the country can effectively mitigate these risks and maintain a stable financial system.