K240bn lost in illicit transfers

Malawi lost about $532 million (about K240 billion) in illicit financial flows between 2002 and 2011, a means through which dirty money is transferred to off shore accounts.

A report on illicit financial flows released recently by the Global Financial Integrity argues that illicit financial flows encourage corruption by allowing corrupt public officials to siphon money from public coffers into secret offshore bank accounts.

Malawi Economic Justice Network (Mejn) executive director Dalitso Kubalasa in a telephone interview on Thursday said this as a “complex syndicate which requires concerted efforts from all stakeholders if it has to stop”.

“This is a big problem in Malawi and we need to dig deeper to stop it so that the economy gets what it deserves from its resources.  We are seeing this happening in the extractive industry including mining and from other resources. This is unfortunate,” said Kubalasa.

He said although there are no specific figures in the industry, there are serious indications of the circulation of dirty money in the country.

Kubalasa cited the recent cashgate and reports of leaders having money in offshore accounts as a sign of illicit financial flows.

The report describes illicit financial flows as cross border transfers of funds that are illegally earned or utilised.

The report adds that such kinds of illegal transactions range from corrupt public officials transferring kickbacks off shore, tax evasion by commercial entities to the laundered proceeds of transactional crimes.

Illicit financial flows also indicate trade misinvoincing whereby traders manipulate trade invoices to over represent or under represent the value of goods they are shipping.

The report further notes that increased illicit financial flows grow the country’s underground economy and consequently expand the criminal elements.

Malawi established the Financial Intelligence Unit (FIU) in 2007 to counter illicit financial flows after the Money Laundering, Proceeds of Serious Crimes and Terrorist Financing Act was enacted in 2006.

FIU is responsible for receiving and analysing reports of suspicious transactions submitted by financial institutions.

According to FIU, money laundering is the process of disguising proceeds of crime using financial intuitions to make the proceeds appear to have been derived from legitimate sources. Proceeds of crime include income from tax evasion, corruption, fraud, corruption, fraud, embezzlement, drug trafficking and human trafficking.

Apart from collaborating with commercial banks, the unit also collaborates with other government agencies including the Malawi Revenue Authority (MRA).

According to the report, South Africa lost about $10 billion, Botswana $845 million, Tanzania $453, Zimbabwe $335, and Rwanda $211.