News / National
Money laundering costs Zimbabwe US$6,5bn
6 hrs ago | Views
Zimbabwe has lost an estimated US$6.15 billion to money laundering-related crimes over the past five years, with car dealerships, gold smuggling, and entrenched corruption networks topping the list of enablers of illicit financial flows, according to the Financial Intelligence Unit (FIU).
The FIU, a government agency mandated to detect and combat financial crimes, says the country is losing an average of US$1.23 billion annually to money laundering. In its 2024 annual report, the FIU warned that these crimes are having a profound impact on Zimbabwe's economy, with the losses equating to about 3.4% of the country's US$35.2 billion GDP last year.
"Estimates suggest the total proceeds could be as high as US$6.15 billion over the same period, equating to approximately US$1.23 billion annually," the FIU said.
The report highlights the central role of money laundering in sustaining Zimbabwe's illicit economy, with six key predicate crimes identified as the main sources of illegal proceeds. These include smuggling (US$920 million), illegal gold and precious stones trade (US$880 million), corruption (US$730 million), fraud (US$500 million), tax evasion (US$300 million), and drug trafficking (US$170 million).
Despite some progress in enforcement, the FIU noted that Zimbabwe's vulnerability to money laundering has worsened between 2019 and 2024, with its risk rating rising from medium to medium-high. The country's vulnerability score increased from 0.52 in 2019 to 0.62 in 2024.
"This deterioration was primarily driven by the country's highly informal, cash-based economy, where over 90% of transactions are conducted in cash, mostly US dollars, posing significant challenges for traceability and oversight," the report said.
The FIU flagged car dealerships as the highest-risk sector due to their exclusion from anti-money laundering (AML) laws and the widespread use of high-value cash transactions with little to no regulatory oversight.
"The car dealers sector was identified as the most vulnerable, with a high risk, primarily due to its cash-intensive nature and lack of regulatory oversight," the FIU noted.
Other high-risk sectors include precious metals and stone dealers, real estate, and the legal profession - all noted for high-value transactions and weak compliance controls. The banking sector was rated medium risk, with vulnerabilities in corporate banking, private banking, and trade finance, though it was praised for its strong legal framework and skilled personnel.
The insurance and securities sectors were considered relatively low-risk, although concerns remain around investment management and the emergence of new financial instruments such as contracts for differences on the Victoria Falls Stock Exchange.
The FIU warned that without urgent reforms to close regulatory loopholes, Zimbabwe's exposure to money laundering risks will remain high.
"Strong regulatory frameworks, enhanced supervision, and stricter enforcement measures are essential across these sectors to mitigate the identified risks," the report said. It also recommended expanding AML controls to all high-risk sectors and promoting greater use of digital financial systems to improve transparency and reduce reliance on cash.
Development economist Chenayimoyo Mutambasere of The Africa Centre for Economic Justice in the United Kingdom said Zimbabwe's illicit financial flows (IFFs) were undermining its economic potential and depriving the country of critical resources needed for public services and development.
"Tax avoidance by multinational corporations and trade mis-invoicing in key sectors like mining not only erode the tax base but also distort economic data, making effective policymaking difficult," Mutambasere said.
"For a country already facing fiscal constraints, these outflows compromise sovereignty over domestic resources and perpetuate dependency on external financing."
She added that Zimbabwe's IFFs often involve the manipulation of accounting practices that exploit volatile exchange rates, resulting in financial records that obscure the true financial position of firms.
"Addressing illicit financial flows must be central to any sustainable development strategy," she said.
The FIU, a government agency mandated to detect and combat financial crimes, says the country is losing an average of US$1.23 billion annually to money laundering. In its 2024 annual report, the FIU warned that these crimes are having a profound impact on Zimbabwe's economy, with the losses equating to about 3.4% of the country's US$35.2 billion GDP last year.
"Estimates suggest the total proceeds could be as high as US$6.15 billion over the same period, equating to approximately US$1.23 billion annually," the FIU said.
The report highlights the central role of money laundering in sustaining Zimbabwe's illicit economy, with six key predicate crimes identified as the main sources of illegal proceeds. These include smuggling (US$920 million), illegal gold and precious stones trade (US$880 million), corruption (US$730 million), fraud (US$500 million), tax evasion (US$300 million), and drug trafficking (US$170 million).
Despite some progress in enforcement, the FIU noted that Zimbabwe's vulnerability to money laundering has worsened between 2019 and 2024, with its risk rating rising from medium to medium-high. The country's vulnerability score increased from 0.52 in 2019 to 0.62 in 2024.
"This deterioration was primarily driven by the country's highly informal, cash-based economy, where over 90% of transactions are conducted in cash, mostly US dollars, posing significant challenges for traceability and oversight," the report said.
The FIU flagged car dealerships as the highest-risk sector due to their exclusion from anti-money laundering (AML) laws and the widespread use of high-value cash transactions with little to no regulatory oversight.
"The car dealers sector was identified as the most vulnerable, with a high risk, primarily due to its cash-intensive nature and lack of regulatory oversight," the FIU noted.
Other high-risk sectors include precious metals and stone dealers, real estate, and the legal profession - all noted for high-value transactions and weak compliance controls. The banking sector was rated medium risk, with vulnerabilities in corporate banking, private banking, and trade finance, though it was praised for its strong legal framework and skilled personnel.
The insurance and securities sectors were considered relatively low-risk, although concerns remain around investment management and the emergence of new financial instruments such as contracts for differences on the Victoria Falls Stock Exchange.
The FIU warned that without urgent reforms to close regulatory loopholes, Zimbabwe's exposure to money laundering risks will remain high.
"Strong regulatory frameworks, enhanced supervision, and stricter enforcement measures are essential across these sectors to mitigate the identified risks," the report said. It also recommended expanding AML controls to all high-risk sectors and promoting greater use of digital financial systems to improve transparency and reduce reliance on cash.
Development economist Chenayimoyo Mutambasere of The Africa Centre for Economic Justice in the United Kingdom said Zimbabwe's illicit financial flows (IFFs) were undermining its economic potential and depriving the country of critical resources needed for public services and development.
"Tax avoidance by multinational corporations and trade mis-invoicing in key sectors like mining not only erode the tax base but also distort economic data, making effective policymaking difficult," Mutambasere said.
"For a country already facing fiscal constraints, these outflows compromise sovereignty over domestic resources and perpetuate dependency on external financing."
She added that Zimbabwe's IFFs often involve the manipulation of accounting practices that exploit volatile exchange rates, resulting in financial records that obscure the true financial position of firms.
"Addressing illicit financial flows must be central to any sustainable development strategy," she said.
Source - Newsday
