Money Laundering Trends and Typologies in Malawi: 2018-2019

Typology 1: Exchange Control Violations

Exchange control violations are a significant concern in Malawi, with two notable cases highlighted in the report.

Case Study 1: Mr. Lennox’s Wire Transfers

• A customer, Mr. Lennox, received numerous wire-transfers from five individuals in a neighboring country, totaling nearly K40 million.
• He claimed the funds were proceeds of sales of building materials.

Case Study 2: Collusion between Bank Officials and Foreign Nationals

• Bank officials colluded with foreign nationals to externalize over K4 billion without supporting documents.

Typology 2: Money Laundering using Business Email Compromise

The report notes an increase in BEC fraud schemes targeting Malawians buying goods from overseas.

How BEC Schemes Work

• Fraudsters create email addresses similar to those of suppliers and send urgent funds transfer requests.

Common Themes

The cases highlighted in the report illustrate several common themes:

• Collusion between bank officials and foreign nationals or customers: Bank officials must be monitored to prevent collusion and ensure compliance with exchange control regulations.
• Lack of supporting documents for transactions: Financial institutions should verify the identity and legitimacy of customers and suppliers to prevent BEC schemes.
• Use of Business Email Compromise (BEC) schemes to obtain financial benefits: The public, particularly businesses and individuals buying goods from overseas, must be educated on the risks of BEC schemes and how to protect themselves.

Analysis

The report emphasizes the importance of effective money laundering regulations and enforcement in Malawi. To prevent such crimes, the following areas need improvement:

1. Improved regulatory oversight: Banks and other financial institutions must be monitored to prevent collusion and ensure compliance with exchange control regulations.
2. Enhanced customer due diligence: Financial institutions should verify the identity and legitimacy of customers and suppliers to prevent BEC schemes.
3. Effective communication: Suppliers and buyers must communicate effectively to avoid falling prey to BEC schemes.
4. Education and awareness: The public, particularly businesses and individuals buying goods from overseas, must be educated on the risks of BEC schemes and how to protect themselves.

By addressing these areas, Malawi can strengthen its efforts against money laundering and prevent such crimes in the future.