About 25 years ago, I was appointed by a European bank to investigate a money laundering case involving a local bank that was suspected of engaging in the illegal externalisation of foreign exchange. The European bank, which had shares in the local bank, was concerned about potential money laundering linked to an international terrorist group. The bank had provided funding to the local bank to improve its capacity to pay for imported goods into the country.
For a business to pay for imports bought on credit, they had to produce customs-stamped import documentation, including a Form 21 Bill of Entry. If goods were paid for in advance through Telegraphic Transfer (TT), these documents were surrendered to the bank to prove that goods had been received in the country.
These customs-stamped documents were supposed to be submitted to the bank for processing the remittance, after which banks would forward the documents, especially the invoice and Form 21, to the customs department for vetting.
However, in this particular case, the customs vetting was deliberately never done. The customs department was supposed to verify whether import duties were paid, but in all instances, it was established that no customs duty was ever paid.
During my detailed investigation, I discovered collusion between the Indian importer, bank staff responsible for submitting documents to the customs department, and customs officers at Mwanza border. The customs officers fraudulently recorded the imports in the border registers. These imports, amounting to about 30 containers valued at tens of millions of dollars over two years, represented only one case among many others. The investigation was halted by the court after the importer opened a case against the European bank’s investigation, but the customs department eventually took over the case.
In this scheme, fake Form 21 documents and import invoices were used to support the issuance of TTs for payment of imports. However, no goods were ever received in Malawi. The company had created counterfeit customs stamps, which were applied to all fake customs documents to make it appear that goods had passed through Mwanza border.
My investigation revealed the following:
- Imports were fraudulently recorded at Mwanza customs records with the collusion of customs staff.
- The customer had manufactured their own customs stamps, which were used to stamp fake customs import documents, including Form 21.
- Bank staff deliberately failed to surrender the customs documents to the customs department for vetting to avoid discovery of the customs duty fraud.
- Import duties were never paid, constituting a major fraudulent act.
- No goods were received in Malawi, yet the payments were processed by Malawian banks.
- Substantial foreign exchange was fraudulently externalised.
- Corruption was established, with the Indian importer paying bribes to customs staff at Mwanza border and local bank staff.
All these findings are as relevant today as they were 25 years ago — and the schemes may be even more sophisticated. Thorough investigations of all imports need to be undertaken. This case study strongly justifies the establishment of the proposed National Forex Crime Investigations Unit in the 2025/26 national budget.
Why Not Assign the Role to Fiscal Police or ACB?
Some may ask why the Fiscal Police or the Anti-Corruption Bureau (ACB) cannot handle these investigations. The proposed Forex Crime Investigation Unit would report suspected cases to the Fiscal Police or ACB for prosecution if evidence of fraud or corruption is found. However, having a dedicated and specialised forex crime investigation unit will ensure efficiency, effectiveness, and a focused approach to tackling forex crimes.
The Director General and key staff of the unit should be appointed by the Unit’s Board of Directors nominated by professional bodies, with the Secretary to the Treasury and Principal Secretary for Trade sitting as ex-officio members. The appointment of key staff must not be left in the hands of politicians. The unit should report administratively to the Presidency and functionally to an independent board of directors, as forex is a life-saving matter for our economy.
Some may argue that this villager is disclosing client information. However, this case was widely reported in court and hit international headlines, making it a matter of public interest.
Malawi must act now — the establishment of the National Forex Crime Investigation Unit is not only timely but also crucial in protecting our nation’s hard-earned foreign exchange reserves.
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