Financial Intelligence Authority (FIA) says it has uncovered new trends in money laundering involving various actors, including public officers, entrepreneurs, individuals and financial institutions.
In its ‘Money Laundering Trends and Typologies Report’ for the period July 2020 to March 2022, the FIA has detailed how over K20 billion was laundered using new payment methods, wildlife syndicates and corrupt public officials.
According to the report, other methods include collusion between employees of financial entities and crime syndicates, trade-based money laundering (TBML), abuse of the international trade system and exchange control violations.
The amount involved is more than what the previous report covering the period between 2018 and 2019 established.
However, the new report has highlighted abuse of debit cards, electronic purses, mobile money payments, online and Internet payment services as other means of cleaning dirty money.
The report said due to payment system failures, some influential public officials withdrew huge cash amounts from government accounts under the disguise of internal and external travel allowances, but without any supporting documents.
Reads the report: “For instance, there was a Malawi Government vote in which over K2 billion was withdrawn in just under six months. The records show that two officers were everyday making cash withdrawals from the bank.
“Thereafter, third parties would then deposit funds into the bank accounts of the concerned public officials. Findings of the preliminary concealed income analysis showed that the public officers had accumulated unexplained wealth.”
The report also said that some public officials laundered the funds by obtaining loans which were then repaid using cash payments or smaller structured cash amounts, with some loans being repaid in full before realisation of the agreed repayment period.
In terms of abuse of international trade system, FIA said it analysed a report of a suspected sole trader who remitted about K17 billion in under two years through two financial institutions using four bank accounts.
The sole trader, according to the report, deals in wholesale business and trades mainly inexpensive grocery items such as sweets, chewing gums, low-priced chocolates, dry yeast, laundry soap, football cup stickers and toilet tissue.
Further, FIA said it also established TBML trends where some employees of the financial institutions played a part by accepting requests to handle transactions and move funds even when they knew that such requests were bogus.
The report detailed how, within three months, a newly registered trade entity remitted about K300 million to various suppliers in one foreign jurisdiction and the registered owner was unable to explain the source of funds.
“He [the owner] later confessed to being used by some foreign nationals to facilitate the transfer of funds through bogus trade transactions,” reads the report.
FIA said some people were also depositing huge sums of money into their local bank accounts and withdrew the same in neighbouring countries in foreign currency. It said the foreign currency is then taken back home and cashed on the parallel market.
What next?
FIA has called for the need to monitor and evaluate the current implementation of foreign exchange controls and enforcement of declaration of currency at points of entry and exit.
“Financial Institutions should enhance their transaction monitoring systems to easily identify changes and unusual transaction patterns,” it urges.
In an interview yesterday, anti-money laundering law expert Jai Banda noted inadequate implementation of laws, weaknesses in regulatory frameworks, corruption and high-level involvement as well as lack of capacity as contributing factors.
He proposed a review of the Financial Crimes Act (FCA) to address emerging trends and technologies such as virtual assets and digital currencies as well as enhancing regulations to ensure accurate and timely disclosure of beneficial ownership information.
Said Banda: “Enhance requirements for financial institutions to verify customers’ identities and maintain accurate records and to ensure that they have effective systems in place to detect and report suspicious transactions.
“Provide sufficient resources, including funding, technology and trained personnel, to law enforcement agencies and regulatory bodies. Also foster collaboration with international partners to share best practices, intelligence and coordinate efforts.”
Catholic University of Malawi dean of law James Kaphale said the growing cases were a result of weak or inadequate enforcement of the Financial Crimes Act.
“There should be stern punitive measures which would deter would-be offenders. Strong enforcement of the law on declaration of assets should be the answer. There has been a lackadaisical approach by the enforcement agencies,” he said.
During the 2020-22 review, 675 suspicious transaction reports were received and out of these, 279 were from commercial banks, 377 from money transfer operators and 25 were from the insurance sector, mobile money operators, foreign exchange bureaus, lawyers and the public, according to the report.
