Table 2 The recommendations of the FACTI panel and the current policies in Malawi

Corruption

From the United Nations High-Level Panel on International Financial Accountability, Transparency and Integrity (The FACTI panel)

FACTI Panel Recommendation ‘Accountability’ (1A):

Enhancing the effective implementation of the United Nations Convention Against Corruption (UNCAC) is critical for improved accountability. All countries should enact legislation providing for the widest possible range of legal tools to pursue cross-border financial crimes.

Malawi signed and ratified UNCAC, the only legally binding global anti-corruption convention, in 2004 and 2007, respectively. It also ratified the African Union (AU) Convention on Preventing and Combatting Corruption in 2007 and the Southern African Development Community (SADC) Protocol against Corruption. Further improvements to effectively implement the global and continental conventions, as well as the SADC protocol to specifically tackle cross-border financial crimes include:

 • Comprehensively reviewing the multi-layered legal framework because of overlaps and discrepancies arising from the conflict between some provisions from the colonial period and modern legislation. This includes reviewing the Penal Code, the Corrupt Practices Act, the Public Finance Management Act, the Financial Crimes Act, Public Procurement and Disposal of Public Assets Act, Criminal Procedure and Evidence Code, the Police Act, the Dangerous Drugs Act, the Customs and Excise Act, and the National Parks and Wildlife Act.

 • Specifically, the definition of theft in the Penal Code is inadequate because it is based on the “larceny notion of taking away a portable thing: It is unfit for offences involving interference with rights over incorporeal property, such as balances in bank accounts, electronic transfer of funds and votes entered into the IFMIS [Integrated Financial Management Information System]” [110].

 • Development of sentencing guidelines for financial crime and corruption offences (ibid).

 • The Courts Act Amendment Bill of 2022 was passed in Parliament on 2 August 2022, and this Bill, if assented to, will see the establishment of the Financial Crimes Division in the High Court to handle corruption and financial crimes cases [111].

 • On 28 July 2022, Parliament passed the Corrupt Practices Act Amendment  Bill and this Bill, this empowers the Anti-Corruption Bureau to prosecute a matter without obtaining consent from the Director of Public Prosecutions Office, thus speeding up the handling of corruption cases [112].

Transparency

From FACTI Panel Recommendation ‘Transparency’ (3A):

Secrecy flourishes because of inconsistent and ineffective beneficial ownership information regimes. Public registry of all beneficial ownership of all legal vehicles.

Identifying the ‘beneficial owners’, or the natural persons who ultimately own, control or benefit from legal vehicles, including companies, partnerships, trusts and foundations, is central to financial transparency and can, for example, “reveal that apparently legitimate and unrelated companies and trusts are in fact implicated in global financial crime or tax abuse scheme” [99]. The best practice requires all owners (without a control or ownership threshold) to be disclosed, including identifying information, for all legal vehicles and for this to be updated with sanctions for non-compliance and systems to verify submitted information [113]. All the information should be housed in a central and public register.

 • The second National Anti-Corruption Strategy (NACS II) (2019-2024) identifies beneficial ownership as part of its objectives in addressing all weaknesses in the legal framework to align it with international best practices in the fight against corruption.

 • Malawi should introduce a public registry for the disclosure of beneficial owners of companies, partnerships, and trusts, managed by the Department of the Registrar General. This should require all beneficial owners to be disclosed without a threshold, as is the case in Botswana [114], and made publicly available free of charge online, like in Nigeria.

 • In December 2022, the Companies (Beneficial Ownership) Regulations were gazetted, requiring companies to disclose the beneficial owners with a 5% threshold; according to Section 11(1), “Any beneficial ownership information shall be treated as public information and may be accessible to the public”.

 • This development, built of Malawi’s commitments to beneficial ownership transparency in the extractive industries and in public procurement relating to the expenditure of IMF financing in the response to Covid-19 [115].

 • Asset declaration assists in preventing and fighting corruption and money laundering as well as in upholding the public trust in the public service. Publicly elected officials and officers of a certain grade and profession in the public service under sections 14 and 15 of the Public Officers (Declarations of Assets, Liabilities and Business Interests) Act 2014 are supposed to declare inter alia their ownership in any assets and business interests to the Office of the Director of Public Declarations [116]. Accountants, procurement officers and lawyers working in certain offices are included in the list of officers supposed to make these declarations. Section 17 of the same Act allows the public to access declarations, which can be made public upon request to the Director. However, declarations are treated as confidential and a list of politically exposed persons should be published [54].              

From FACTI Panel Recommendation ‘Transparency’ (3B):

Public country-by-country reporting of all private multinational companies

Multinational companies should publish a country-by-country report that includes disaggregated data on the corporate group’s activity, including revenue, profit and loss, taxes paid, and the number of employees. This makes it possible to better target audits and investigations of tax avoidance and evasion. In the absence of global public country by country reporting standards, a second-best scenario is a requirement for the local filing of country-by-country reports, which means that “authorities of all countries where a multinational has operations can access reports in cases where these reports cannot be obtained through automatic exchanges, regardless of the reason” [117]. Malawi should introduce this requirement, especially since Malawi is not a signatory to the G20/OECD Common Reporting Standard Multilateral Competent Authority Agreement, which is required to automatically exchange country-by-country reports [118]. Even if Malawi were a signatory, there are prerequisites placed on tax authorities for exchanges and limits placed on the use of reports that are exchanged [119].

From FACTI Panel Recommendation ‘Transparency’ (3C):

Building on existing voluntary efforts, all countries should strengthen public procurement and contracting transparency

Malawi’s Public Procurement and Disposal of Public Assets Act of 2017 lays the groundwork for open contracting and the NACS II makes commitments to reduce public procurement corruption. The government through the Public Procurement and Disposal of Assets Authority (PPDA) is implementing open contracting initiatives, which will promote the principles of transparency enshrined under sections 30 and 31 the Act [120]; however, procuring entities are not fully complying with disclosure requirements and the online open data portal is not yet fully operational [121]. The open contracting initiative is in pursuance of section 57(2) of the Public Procurement and Disposal of Public Assets Act which stipulates that a procuring entity is obligated to disclose information that may affect a procurement process to the party who has any interest in the said process [122]. The PPDA has launched an e-services platform as a means of making procurement services more efficient. This is in line with the mandate of the Public Procurement and Disposal of Assets Authority provided under section 5 of the primary legislation that states that the Authority shall be responsible for developing and enhancing the efficiency of procurement and disposal of assets processes.

Fairness in taxation

From FACTI Panel Recommendation ‘Fairness’ (4A):

Taxpayers, especially multinational corporations, should pay their fair share of taxes. The UN Tax Convention should provide for effective capital gains taxation. Taxation must be equitably applied on services delivered digitally.

In Malawi’s Domestic Revenue Mobilisation Strategy (DRMS) 2021-2026, the government includes a number of activities that feed into enabling the government to pursue cross-border financial crimes and tax abuse [52]. This includes revisiting old and disadvantageous tax treaties and countering tax abuse in line with the BEPS action plans, alongside strengthening audit capacity, with specific focus on banking, insurance, telecommunications, mining, and construction. Malawi has a dedicated office for large taxpayers and transfer pricing legislation, which assist in the taxation of multinational corporations. Yet the DRMS does not specifically mention illicit financial flows or trade misinvoicing.

The digitalised economy poses new challenges for taxation and in an ideal situation, to tax digital services provided by multinational companies, multinational corporations should be taxed with a formulary apportionment approach based on group global profit. Yet in the absence of this and Malawi could carry out a cost-benefit analysis and follow Kenya, Nigeria, and Tanzania by applying a unilateral (direct) tax on non-resident digital service providers.

Malawi should review all double tax treaties in force, especially one signed before Malawi’s independence, such as with the United Kingdom (1955), Switzerland (1961) and France (1963), to ensure provisions favour greater retention of taxing rights of source countries compared to the residence country of investors [123]. Particular attention should also be paid to current tax treaties under negotiation or those that are already initialled, such as one initialled with Mauritius in 2017.

Enablers

From FACTI Panel Recommendation ‘Enablers’ (6):

Developing countries are systemically disadvantaged in the current international tax architecture. Governments should develop and agree global standards/guidelines for financial, legal, accounting, and other relevant professionals, with input of the international community

Enablers refer to a set of professionals, including lawyers, accountants, and bankers, that may support individuals and companies in tax abuse. The FACTI Panel observes the abuse of legal privilege to assist in money laundering and tax abuse, that self-regulation by enablers, by their institutions and by law associations is insufficient and unreliable, and despite the social costs, many governments have not set standards or do not enforce these standards in the public interest.

 • The most recent mutual evaluation review of Malawi conducted by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) in 2018 to assess the level of Malawi’s implementation of the Financial Action Task Force (FATF) recommendations on anti-money laundering (AML) and counter-terrorist financing (CFT) includes an evaluation of designated non-financial businesses and professions (DNFBPs). This includes lawyers and accountants. The report states that in Malawi “the DNFBP sector is a fairly small player and therefore it has a minimal integration into the global financial system”. In addition, “The lawyers, accountants and real estate agents demonstrated a good application of AML/CFT [Anti-Money Laundering/Combatting the Financing of Terrorist] [… but] with the exception of banks, filing of STRs [Suspicious Transaction Report] by the other FIs [Financial Institutions] and DNFBP sector is low”. There is also room for improvement in understanding among law firms about the risks of in relation to beneficial ownership information of companies, trusts and other legal vehicle, and accounting firms along with other DNFBPs, except law firms, were recommended to improve enhanced and on-going due diligence [124].

 • Supervision. Under sections 4 and 5 of the Financial Crimes Act, the Financial Intelligence Authority can receive and request reports from DNFBPs and instruct them to take steps to facilitate an investigation anticipated by the Authority. The said Act under section 5 also permits the Authority to issue guidelines to supervisory bodies for the better carrying out of its functions. It can also delegate its powers to supervisory bodies that regulate certain professions. In Malawi, lawyers are regulated by the Malawi Law Society whilst accountants are regulated by the Malawi Accountants Board and supervised by Institute of Chartered Accountants as mandated by the Public Accountants and Auditors’ Act 2013. A risk-based supervision system was not in place at the time of assessment for DNFBPS, and only for supervision of financial institutions.

 • Sanctions. No sanctions had been applied for violation of AML/CFT requirements by DNFBPs according to the ESAAMLG: “no sanctions have been given to DNFBPs in the period under review while limited remedial actions have been issued to DNFBPs that have been inspected. Therefore, it is difficult to determine if in practice, the sanctions are dissuasive, proportionate, and effective in respect of the DNFBPs”. That said, recommendation 28 on regulation and supervision of DNFBPs was assessed as met [124]. Section 23 of the Financial Crimes Act is the law that instructs financial institutions and DNFBPs to report suspicious transactions to the Financial Intelligence Authority. Sanctions for non-compliance with the Act are provided in section 24 and according to the Money Laundering and Terrorist Financing National Risk Assessment report, prepared by Malawi’s Financial Intelligence Authority, no criminal sanctions have been imposed on lawyers [53]. However, three lawyers suspected to be involved in the Cashgate scandal were charged under the old Money Laundering Act and their matters are now in court. The lawyers were not sanctioned by the Malawi Law Society for their alleged involvement in the scandal.

 • Reporting. A further measure would be to introduce rules to collect intelligence from tax advisors and taxpayers about complex and risky tax avoidance practices. Such as, mandatory rules requiring tax advisors and taxpayers to report to the Malawi Revenue Authority 1) any tax avoidance schemes marketed/sold or used, and 2) on uncertain tax positions for which reserves have been created in annual corporate accounts [125]. At present, lawyers are expected to report to the Financial Intelligence Authority any transaction that surpasses 1 million MWK.

Civil society actors, whistle-blowers, and journalists

From FACTI Panel Recommendation ‘Non-State Actors’ (7A): States should consider incorporating minimum standards of protection for human right defenders, anticorruption advocates, investigative journalists and whistle-blowers in a legally binding international instrument

Whistle-blowers: The legal framework to protect whistle-blowers is inadequate, “due to bureaucratic culture, lack of incentives and feelings of insecurity by would-be whistle-blowers” [110]. Development of a comprehensive legal framework is the first step, especially ensuring protection alongside incentivising whistle-blowing through rewards and providing access to remedy and compensation for victimised whistle-blowers. However, the Platform to Protect Whistle-blowers in Africa indicates in their assessment of Malawi that compromised integrity of some officials working in law enforcement agencies disincentivises would-be whistle-blowers and increases the risks for those who do blow the whistle [126]. In the absence of a comprehensive legal framework, the following existing laws afford some protection to whistle-blowers, including:

 • Section 51A of the Corrupt Practices Act provides protection for whistle-blowers by stating that their identity will not be disclosed in criminal or civil proceedings unless the court believes after full inquiry into the case that the whistle-blower intentionally provided information that he knew to be false or the court believes that it is in the interests of justice that the whistle-blower’s identity is disclosed [127].

 • Section 20 of the Public Officers (Declarations of Assets, Liabilities, Business Interests) Act provides protection for whistle-blowers by stating that their information shall not be submitted as evidence in a court proceedings and no person shall be obliged to disclose the identity of the whistle-blower [116]. The provision, however, gives an exception to that protection by stating that if the court or the Director after inquiry into the case determines that the whistle-blower deliberately gave false information to the Director, the immediate disclosure of the identity of the whistle-blower will be required. That said, section 21 of the said Act provides protection for the whistle-blower by stating that anyone who reveals the identity of the whistle-blower commits an offence and shall on conviction, face the penalty of MWK500,000 and two years’ imprisonment.

 • Section 50 of the Access to Information Act states that a person will not be penalised for disclosing information regarding corruption that they obtained in confidence in the discharge of  their professional  duty, if the disclosure is in the interests of the public [128].

 • In the Corruption Prevention Policy for the Public Procurement and Disposal of Assets Authority, it states that where an employee in good faith, reports inter alia suspected corruption, the Director shall take reasonable steps to protect them from victimisation [129].

 • There is also an informant scheme introduced in some agencies, including by the Malawi Revenue Authority with both an in-house informant scheme and Deloitte Tip-Offs Anonymous for members of public to inform the Malawi Revenue Authority or the police of suspected cases of tax evasion and get a reward in return [130]. This act by the public is stated to enable the Government to collect more revenue and as a consequence provide services to the public such as health, education and justice [131].

Human rights defenders and journalists face intimidation. Reporters Without Borders in their assessment of Malawi considers that political influence over the media restricts journalistic freedom, and journalists are subjected to threats and online harassment [132]. As recently as April 2022, an investigative journalist was detained and questioned by the police, in an attempt to force him to disclose sources in relation to reporting about alleged corruption and financial crime [133, 134]. In its assessment of Malawi, Freedom House indicates that the vague wording in the 2016 cybersecurity law (Section 87, Electronic Transaction and Cyber Security Act) on offensive communication could threaten online freedom of speech and press [135] alongside older provisions in the penal code and the Protected Flag, Emblems and Names Act that stifle free speech online and offline [136]. 

Access to information: Section 5 of the Access to Information Act of 2016 permits people to request information from public and private bodies in exercise of their rights [130]. However, under sections 30 to 36, there are among others, limitations for the disclosure of that information; for instance, the institution may refuse to disclose the information if it is legally privileged, or its disclosure would threaten national security. Regulations were enacted in 2021 [137].

Data protection: Broadly, and important for all citizens and not just civil society actors, whistle-blowers and journalists, Malawi requires a robust data protection framework, especially given the escalation in personal data collection in the last five years. The introduction of the national digital ID programme in 2017 and mandatory SIM card registration in 2018 necessitate urgent finalisation and passage of the draft Data Protection Bill of 2021 [138].

Automatic Exchange of Information

From FACTI Panel Recommendation ‘International Cooperation’ (8):

End asymmetries and promote free exchange of information to combat illicit financial flows

The automatic exchange of information between jurisdictions is intended to provide a jurisdiction with data on of all the financial activity abroad of its residents to prevent residents concealing the true value of financial activity and enable law enforcement agencies to ascertain that residents are paying the correct amount of tax and investigate tax evasion and other crimes. The current framework promoted by the OECD and G20 includes the Common Reporting Standard and the Multilateral Competent Authority Agreement to implement the standards alongside the OECD Convention on Mutual Administrative Assistance in Tax Matters for the exchange of information on request. Yet there is “defacto exclusion of developing countries” based on the design and prerequisites to receive information as well as restrictions on data usage by law enforcement agencies [139]. Notwithstanding fundamental challenges with the current international framework for the exchange of information on request and the automatic exchange of information, Malawi should become signatory given these are the primary tools for the exchange of information on request multilateral automatic exchange of information and could help the Malawian government address tax-motivated illicit financial flows [140].

National systems and coordination

From FACTI Panel Recommendation ‘Dynamism’ (9):

Governments must dynamically adjust their national and international systems in response to new risks.

Nimble adaptation based on rapid technological developments is central to tackling illicit financial flows. In particular, the rise of virtual asset service providers, such as those providing cryptocurrencies, has widespread implications for anti-money laundering and efforts to stop tax abuse. Section 21 of the Financial Crimes Act instructs financial institutions to conduct money laundering and terrorist financing (ML/TF) risk assessments with regards to the products offered and delivery channels and to take counter measures commensurate the risk. At the time of the last assessment of Malawi by the Eastern and Southern Africa Anti-Money Laundering Group, Malawi had not identified and carried out an ML/TF risk assessment associated with the development of new products and new business practices, including new delivery mechanisms, and the use of new technologies for both new and existing products [124]. In the same year, in 2019, the Reserve Bank of Malawi issued a statement informing the public that cryptocurrencies are not a legal tender in Malawi and the Central Bank has no oversight responsibility over cryptocurrency trade [141]. More recently, in April 2022, Malawi’s Financial Intelligence Authority conducted meetings sensitising anti-money laundering stakeholders on virtual assets risks and in these meetings the participants were told to take part in the exercise as the risk assessment findings will help Government policymakers to determine an appropriate policy position to be taken  on virtual assets and virtual asset service providers [142].  

From FACTI Panel Recommendation ‘National Governance’ (13):

Governments should create robust and coordinated national governance mechanisms that efficiently reinforce financial integrity for sustainable development and publish national reviews evaluating their own performance.

Whole-of-government systems are needed for a holistic approach to ensure all types of illicit financial flows are covered and a range of expertise is applied [140]. The Money Laundering and Terrorist Financing National Risk Assessment Report (2018) explains that the National AML/CFT Committee, set up formally in September 2017, facilitates close cooperation and information sharing required for effective AML/ CFT in the country [53]. Before this, there was a committee that met on an ad hoc basis and was not formal. The current committee is co-chaired by the Secretary to the Treasury and the Director General of Financial Intelligence Authority; however, its powers and responsibilities are not sanctioned by any law, which means its decisions are not legally binding. The Risk Assessment also identifies room for improvement in coordination, including in asset forfeiture and between the Financial Intelligence Authority and other law enforcement agencies. 

Individual institutions, including the Reserve Bank of Malawi, the Financial Intelligence Authority, the Malawi Policy Service (Fiscal and Fraud Department) and the Malawi Revenue Authority, all have a mandate to investigate. The recent, ongoing, high profile joint UK-Malawi investigations [143, 144] into a British citizen of alleged billions of Malawi kwacha of illegally acquired wealth from Malawi primarily through alleged procurement fraud suggest that improved coordination, among other areas, is needed in investigation, and between agencies responsible for investigation and prosecution [145]. These investigations also point to the potential greater cooperation and information sharing between Malawi and other jurisdictions in investigation with the aim of prosecution and asset recovery. On tax evasion, there are several cases that the Malawi Revenue Authority have in the courts relating to transfer pricing. In total, about MWK100 billion in tax revenues is involved in these cases. However, the limited progress may be in part explained by challenges with specialisation to litigate such cases, which will likely be addressed partially by the establishment of a division in the High Court for financial crimes [146].