The Financial Intelligence Authority (FIA) has sounded the alarm over the increasing complexity of money laundering schemes in Malawi, warning that criminals are exploiting both old and new avenues to disguise illicit funds and undermine the financial system.
In its latest Money Laundering Trends and Typologies Report, covering July 2020 to March 2022 and released in February 2025, FIA reveals a rise in advanced money laundering techniques, particularly the layering of funds.
This is a method used to conceal the criminal origin of money by moving it through multiple accounts and transactions, especially within banks.
The authority, in a statement accompanying the release of the report, says that non-governmental organisations (NGOs) have also been used to defraud people.
It says fraudsters are luring individuals into opening accounts or using third-party accounts with the intention of exploiting them for fraudulent activities and abusing exchange control regulations.
According to the report, the layering technique involves transferring large sums of money through numerous business and personal accounts in a manner that does not align with legitimate business activities.
Among the novel tactics unearthed, FIA highlights the misuse of NGOs as a major new trend.
Fraudsters, the report reveals, are capitalising on the public’s trust in NGOs by encouraging people to deposit money with promises of lucrative benefits, ranging from agricultural farm inputs to education bursaries.
“The public should be wary of any suspicious NGO promising unrealistic benefits in exchange for upfront payments,” FIA cautions in the report.
Another trend highlighted in the report involves cross-border traders misusing automated teller machine (ATM) cards to withdraw large amounts of foreign currency from machines outside Malawi.
“We have further noted that some individuals are abusing the facility by using ATM cards belonging to various individuals to withdraw foreign currency outside Malawi, and in the process, violating some foreign currency exchange controls,” the report states.
FIA further says that while it is common for cross-border traders to carry plastic money and access funds from ATMs as foreign currency in bordering countries, even non-cross-border traders are engaging in the same practice to benefit from competitive rates of foreign currencies over the Malawi Kwacha.
“The practice is becoming a conduit for illegal forex externalisation and terrorist financing, as not everyone accessing foreign currency in bordering countries is doing so for cross-border trading purposes,” the report continues.
Additionally, FIA has identified cases where traders use multiple ATM cards belonging to different individuals, further complicating efforts to track the origin and purpose of the funds.
FIA has since called on traders and financial institutions to strictly adhere to foreign exchange laws, warning that abuse of the system puts the country’s financial stability at risk.
The report has also highlighted what it refers to as tax evasion through the structuring of import payments so that each importation falls below the limit for customs duty.
“This is done when a businessperson imports a large consignment of goods, but which are paid for and received as multiple small parcels,” it says.
The report further indicates a trend where customers apply for additional international remittances before reconciling previous payments.
It mentions that some customers jump from one bank to another while having unreconciled returns.
Regarding the concentration of transactions in the border districts, the report says: “Threats and vulnerabilities have been identified, which emanate from the high concentration of cash flowing towards the border districts of Karonga and Mchinji, which border Tanzania and Zambia respectively.”
Despite the rise in new schemes, traditional money laundering methods continue to thrive, according to the agency.
These include theft of public funds, the use of false documents, under-declaration of Know Your Customer information, fraud within financial institutions, trade-based money laundering and environmental crimes.
FIA highlights “a particularly troubling case” where bank employees reportedly manipulate dormant or less active accounts, often belonging to Malawians living abroad.
By understating deposits and siphoning off the difference, these employees avoid immediate detection, according to the report.
“In most cases, detection happens when significant sums have already been diverted,” the authority says.
On the other hand, FIA has expressed concern over the lack of reports from key sectors such as real estate, casinos, accountants and precious stone dealers, suggesting possible under-reporting or lapses in compliance.
“Reporting entities are the first line of defence. We urge all sectors to remain alert and play their part,” the agency says.
Reserve Bank of Malawi (RBM) Governor MacDonald Mafuta Mwale has confirmed that he has seen the report and said that the central bank is examining the trends.
“Money laundering is indeed deep and complex in the country. We are working together with other financial intelligence agencies in the region and central banks to curb the malpractice,” Mafuta Mwale said.
He has since called on traders and financial institutions to strictly adhere to foreign exchange laws, stressing that abuse of the system puts the country’s financial stability at risk.
The RBM governor has also urged Malawians, including individuals, businesses, financial institutions and NGOs, to stay vigilant and report any suspicious financial activity.
“An efficient and effective Anti-Money Laundering and Counter-Financing of Terrorism regime is crucial to protecting the integrity of Malawi’s financial system,” Mafuta Mwale said.
Commenting on the report, information officer at FIA, Masautso Ebere, said that although the document was published recently, the trends remain the same.
On his part, money laundering expert Jai Banda said that the report shows that money laundering has worsened in the country.
“This is what has resulted in Malawi’s economic crisis. If the trends continue, then nothing will work in the country,” Banda said.
Political analyst Boniface Dulani supported the report’s findings that implicate banks in the facilitation of illicit financial activities, including money laundering and fraud, saying that such conclusions are “obvious” given the role financial institutions play in resource transfers.
“You cannot be involved in money laundering, fraud or illicit transfer of resources without using the banks. In most cases, banks are central to these activities,” Dulani said.
He also pointed to banking confidentiality policies as inadvertently enabling such transactions, suggesting they contribute to the persistence of financial crimes.
Dulani has since called for a coordinated approach among all sectors of Malawian society, including religious bodies, NGOs and civil servants, to promote integrity and accountability.
Chairperson of the National Alliance Against Corruption, Moses Mkandawire, said that the fraud methods exposed in the report complicate efforts to trace funds back to their illegal source.
“The financial system is being abused to mask illegal activities. FIA must work closely with stakeholders to address this,” Mkandawire said.
He added that the report serves as a stark reminder that fighting money laundering requires collective effort and constant vigilance, particularly as criminals continue to develop more sophisticated methods to exploit vulnerabilities.
RBM has recently introduced stricter foreign exchange regulations aimed at bolstering the country’s foreign currency reserves.
This is a response to forex crises that have left several sectors grappling as prices of goods have been skyrocketing amid the weakening of the Kwacha on the parallel market, where traders reportedly access their forex.
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