Financial Crime World

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Malawi’s Money Laundering and Terrorist Financing Risks: A 2017/2018 Review

Malawi’s financial sector has faced significant challenges in combating money laundering (ML) and terrorist financing (TF) in the past year, according to a comprehensive review by the National Risk Assessment (NRA) team.

Assessing the Risks

The NRA team analyzed ten sub-groups to assess the country’s risk and vulnerability to ML and TF. The sub-groups examined various sectors, including:

  • Law enforcement agencies
  • Banking
  • Insurance
  • Securities
  • Other financial institutions
  • DNFBPs (Designated Non-Financial Businesses and Professions)
  • Non-governmental organizations
  • Legal persons and arrangements

Key Findings

The review highlighted several key findings:

  • Sub-Group One found that criminal offenses generating proceeds of crime were a significant threat to ML.
  • Sub-Group Two identified internal and external terrorism as a major TF risk.
  • Sub-Group Three assessed the national vulnerability to ML and TF, finding that law enforcement agencies faced challenges in tackling the problem due to:
    • Inadequate training
    • Limited resources
    • Lack of cooperation among institutions

Vulnerabilities in Various Sectors

The review also highlighted vulnerabilities in various sectors:

  • Banking sector: vulnerable due to provision of various bank products with inherent vulnerabilities.
  • Insurance, securities, and other financial institution sectors: identified as having ML/TF vulnerabilities.
  • DNFBPs (including casinos, real estate dealers, lawyers, and accountants): found to be vulnerable to ML/TF.
  • Non-governmental organizations (NGOs): identified as a potential source of TF vulnerability.

Challenges

The review noted that Malawi’s predominantly cash-based economy made it difficult for law enforcement agencies to trace proceeds of crime. The use of cash was identified as an obstacle to tracing proceeds, and many offenders often failed to leave evidence of their criminal activities.

Data Collection Methods

Data for the NRA was collected through various methods:

  • Databases
  • Questionnaires
  • Reviews of publications
  • Telephone and face-to-face interviews
  • Public information sources
  • Review of legislation

Positive Developments

Despite these challenges, the review noted that there were some positive developments:

  • Growing awareness of ML/TF issues in Malawi had led to convictions on cash-gate cases.
  • Most of the cases used in the NRA related to the cash-gate scandal.

Limitations

However, the review also identified several limitations:

  • Lack of understanding of ML/TF laws among stakeholders
  • Limited resources and capacity of law enforcement agencies
  • Difficulty in tracing proceeds of crime due to Malawi’s cash-based economy