Illicit deals rob economy K21bn
Financial illicit deals, coupled with fraudulent trade misinvoicing, drained the economy $30 455 million (about K21 billion) between 2005 and 2014, a recent study by the Global Financial Integrity (GFI) indicates.
The report released on Monday, titled Illicit Financial Flows (IFFs) to and from Developing Countries: 2005-2014, pegs illicit financial outflows at 4.2-6.6 percent of developing country’s total trade in 2014.
However, compared to neighbouring countries, at K21 billion, Malawi is far better as figures from the report show that as much as $124 376 million was lost to the malpractice in Zambia followed by $113 717 million in Tanzania.
Mozambique registered a $86 657 million loss while Zimbabwe recorded $61 083 million loss during the same period.
IFFs are a large and growing problem for the African continent, accounting for 14.1-24.0 percent of total developing country trade over 2005-2014, according to the report.
The report further says fraudulent misinvoicing of trade has drained between $620 billion (about K454.4 trillion) and $970 billion (about K711 trillion) from developing countries, including Malawi.
To curtail trade misinvoicing, GFI suggests that customs agencies should treat trade transactions involving a tax haven with the highest level of scrutiny.
“Governments need to significantly boost their customs enforcement by equipping and training officers to better detect intentional misinvoicing of trade transactions, particularly through access to real-time world market pricing information at a detailed commodity level,” further reads the report.
GFI has since developed a product to assist governments in the detection of potential misinvoicing in real-time, a proprietary risk assessment application developed to enable customs officials to determine if goods are priced outside typical ranges for comparable products.
Speaking to Business News recently, anti-money laundering law expert, Jai Banda, said Malawi still has room for new approaches in the fight against financial crimes.
He urged the country to consider looking at the recommendations to fight IFFs by devising them in a way that they are applicable to the country.
“It is important that we take a look at recommendations aimed to fight IFFs to see how they stand to benefit us in the fight against crime. We need not take them as whole but scrutinise each one of those and see how we can bring them in a Malawian context,” he said.
Banda, however, called for political will if the country is to benefit from the given recommendations.
Financial Intelligence Unit (FIU) spokesperson Masauko Ebere is on record as saying Malawi has made strides in curtailing IFF as, since 2013, it has been reviewing the Money Laundering, Proceeds of Serious Crime and Terrorist Financing Act to make it compliant with the Financial Action Taskforce (Fatf) recommendation.
