A LESSON IN FINANCE: Money Laundering 101


A couple of years ago the Reserve Bank of Malawi launched and anti money laundering and ant- terrorism financing campaign.

For the first time the existence of money laundering was made known to the Malawian public and after holding conversations with several people, I was not surprised to find out that many Malawians do not fully understand exactly what money laundering is, and they usually make the mistake of confusing it with the hoarding of forex or cash.

So allow me to clear things up a bit, to begin with “Money laundering is the practice of engaging in a series of financial transactions to conceal the ownership, source, control or destination of illegally gained money.”- Wikipedia

So in simple terms money laundering is the art of taking money made from illegal activities and making it appear as if it is income from a legitimate business.

To illustrate let us say that I am a major grower of Malawi Gold(Malawian Marijuana) and I not only supply locally but also internationally which would mean I make millions of Kwachas, but I cannot just go to the bank and deposit these millions without the bank being suspicious, so what do I do?

Easy, I set up a “ghost business” which can be a chain of hardware stores and agriculture product stores, stores that stock items that are regularly bought by people in the area of my operations, and I open bank accounts for my chain.

Now then when that is all set I will be able to deposit my drug money with no complications, what I will do is, draw up fake receipts and invoices and look like they were payments made to my shops and present the drug money as cash from these payments, thereby making the drug money appear to be legitimate income from sales in my shops. I will even draw up fake trading accounts that would be records of bogus transactions and the sales listed on the profit and loss account will actually be sales from my drug business.

So to conclude in the simplest terms money laundering is exactly what its name suggests; cleaning dirty money.

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