Countries/Jurisdictions of Primary Concern - Malawi
Malawi is not a regional financial center. The main source of illegal profits in Malawi derives from public corruption. Malawi is currently addressing a major corruption scandal popularly known as “Cashgate” centering on the looting of government accounts by public officials through fraudulent transactions in the government’s computerized payments system. Another significant source of illicit funds is the production and trade of cannabis sativa (Indian hemp), which is extensively cultivated in remote areas of the country. Anecdotal evidence indicates Malawi is a transshipment point for other forms of narcotics. Human trafficking, vehicle hijacking, and fraud are also areas of concern.
Smuggling and the laundering of funds are exacerbated by porous borders with Mozambique, Zambia, and Tanzania. There are indications of trade-based money laundering, mostly through over- and under-invoicing. There are also cases of goods smuggled across the border; it is believed contraband smuggling generates proceeds that could be laundered through the financial system. Some of the trade-based money laundering is reportedly linked to Pakistan and India. Money/value transfer systems, such as hawala, are a concern. Malawi has a cash-based economy and there are usually few paper trails to follow in financial investigations.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, microfinance institutions, leasing and finance companies, lawyers, legal practitioners, notaries, casinos and other gaming entities, real estate agents, trust and company service providers, foreign exchange bureaus, accountants, auditors, dealers in precious metals and stones, safe custody services, buyers and sellers of gold bullion, stock brokers, and the stock exchange
Number of STRs received and time frame: 77: January 1 - October 31, 2014
Number of CTRs received and time frame: 2,488,698: January 1 - October 31, 2014
STR covered entities: Banks, foreign exchange bureaus, microfinance institutions, money transmitting firms, discount houses, insurance companies, real estate agencies, casinos, accountants, lawyers, dealers in precious metals and stones, capital markets
money laundering criminal Prosecutions/convictions:
Prosecutions: 3 in 2014
Convictions: 3 in 2014
Records exchange mechanism:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Malawi is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.esaamlg.org/reports/view_me.php?id=165
Enforcement and implementation issues and comments:
The Government of Malawi has enacted AML/CFT legislation and implementing regulations. The development of institutional capacity and mechanisms is still lacking.
Not all of the entities responsible for conducting customer due diligence are complying with the law. Only banks, foreign exchange bureaus, microfinance companies, insurance companies, and real estate agents have provided financial intelligence reports to the FIU. Authorities believe a deficient national identification system makes it difficult for financial institutions to require a standard form of identification. Due to a relatively low 1 million Malawi Kwacha (approximately $2000) threshold for reporting transactions to the FIU, it becomes swamped with reports without adequate resources to analyze them. In its seven years of existence, a permanent FIU director has not been named.
In 2013 and 2014, the Anti-Corruption Bureau filed money laundering charges against suspects implicated in the “Cashgate” corruption scandal, resulting in Malawi’s first successful prosecutions and convictions for money laundering in October 2014. This experience has underscored, but also begun to result in Malawi rectifying, authorities’ lack of capacity and investigative and prosecutorial expertise. In light of this experience, an area of particular concern is the courts and judges’ understanding of the scope and application of the relevant laws and technical modalities of how money laundering can occur.
The Government of Malawi should work toward full implementation of its AML/CFT legislation. In 2013, the FIU drafted revisions to the Money Laundering Act that, if adopted, would empower the FIU to investigate and prosecute cases and ensure greater funding for its operations, but throughout 2014 the proposal remained with the Ministry of Justice for its review.