ZimNow News Desk

The seizure of US$1.1 million in cash from two Tanzanian nationals in Malawi is the latest exposure to Southern African governments limited capacity to combat illicit financial flows, a problem the United Nations says drains tens of billions of dollars from the region and undermines economic development.

Police in Malawi arrested the two men after reportedly discovering the cash concealed in a vehicle travelling towards Tanzania. The suspects have been charged under Malawi's Foreign Exchange Act and Financial Crimes Act, while the Reserve Bank of Malawi has taken custody of the money as investigations continue. Authorities have not yet established the source of the funds or whether they are linked to wider criminal activity.

According to a recent United Nations policy brief on illicit financial flows in the Southern African Development Community (SADC), the region recorded an estimated US$40.4 billion in outward illicit financial flows in 2017, compared with US$21.9 billion in inward flows. The report identifies trade misinvoicing, corruption, tax evasion, money laundering, illegal exploitation of natural resources and cross-border cash movements as some of the principal channels through which wealth leaves the region outside legitimate financial systems.

The UN notes that illicit financial flows impact on public welfare. "Illicit financial flows deprive countries of resources needed for sustainable development," the policy brief says, arguing that the losses reduce governments' ability to finance infrastructure, healthcare, education and social protection.

Former South African President Thabo Mbeki, who chaired the African Union High Level Panel on Illicit Financial Flows, famously observed: "Africa is not poor. It is being impoverished."

The issue has become a growing priority for SADC. In December 2024, the SADC Anti-Money Laundering and Combating the Financing of Terrorism Committee agreed amendments to the SADC Protocol on Finance and Investment that include stronger regional cooperation against illicit financial flows. The proposals encourage member states to incorporate IFF risks into their national risk assessments and strengthen cooperation between financial intelligence units and law enforcement agencies.

The panel's work helped shift international attention towards the scale of financial leakages from the continent and the need to tackle them through stronger governance, transparency and international cooperation.

But results have been limited. The problem extends far beyond bags of cash hidden in vehicles. The UN says trade misinvoicing, where imports or exports are deliberately over- or under-valued to move money across borders, accounts for a substantial share of illicit financial flows globally.

Other methods include the laundering of proceeds from corruption, illegal mining, wildlife trafficking, organised crime and tax avoidance schemes. Physical cash smuggling remains one avenue, particularly in economies where significant transactions still occur outside formal banking channels.

For Zimbabwe, the issue carries particular relevance. The country has a largely cash-based informal economy, is one of Africa's leading gold producers and sits at the crossroads of major regional trade routes. While these characteristics support commerce, they also present opportunities for illicit financial flows if financial oversight is weak.

The UN argues that improving customs systems, strengthening financial intelligence units, expanding digital payments, increasing transparency in extractive industries and improving cooperation between neighbouring countries are among the measures that can significantly reduce illicit financial flows.

Regardless of the legal outcome of the Malawi seizure, the case illustrates why Southern African authorities are increasingly treating unexplained movements of large sums of cash as potential indicators of wider illicit financial flows rather than isolated financial offences.