Treasury moves to choke off illicit financial flows

ROBIN PHIRI

Treasury is set to unveil a series of measures aimed at accelerating the formalisation of informal businesses, warning that the country’s heavily cash-based shadow economy is fuelling tax evasion, smuggling, corruption, and illicit financial flows.

The development was revealed by Finance, Economic Development and Investment Promotion Deputy Minister Kudakwashe Mnangagwa who spoke at the launch of the third money laundering and terrorist financing assessment report in the capital Harare yesterday

He disclosed that initiatives under the National Development Strategy (NDS2) will tighten oversight and reduce illicit deals.

“The NDS 2 will set out key policies that will move the country along this path, and as we get to the NDS 2 launch you will see a few announcements and policy refinements that ensure that there’s an ease of doing business and will allow for more formalisation of the informal,” Mnangagwa said.

He noted that the report exposes “exorbitant informalisation rates” in the economy, where transactions conducted entirely in cash fall outside the reach of tax authorities and law enforcement agencies such as Zimra and the Financial Intelligence Unit (FIU). Aligning Zimbabwe’s anti-money laundering and counter-terrorist financing (AML/CFT) regime with global standards is critical ahead of the country’s third-round mutual evaluation under the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) in June 2026, Mnangagwa added.

The report outlines a range of measures including risk-based supervision of banks, financial institutions, and designated businesses, enhanced investigative capacity for law enforcement to track and prosecute financial crimes, the confiscation of illicitly acquired wealth, and the regulation of virtual assets alongside oversight of virtual asset service providers.

“As part of the national risk assessment process, an exercise was undertaken to identify and assess the money laundering and terrorism financing risks posed by the use of virtual assets. A risk assessment is a necessary prerequisite for effective regulation of virtual assets. As government, we’ll carefully consider the recommendations in the report with a view to taking them on board,” Mnangagwa said.

The national risk assessment flagged tax evasion, smuggling, corruption, and illicit trade in precious metals and stones as the primary drivers of illegal financial flows. Oliver Chiperesa, Director General of the FIU, echoed the concerns, attributing Zimbabwe’s vulnerability to the entrenched cash economy. “We have a robust mechanism by which we monitor the implementation of the five-year strategy informed by the national risk assessment. We’ll be carrying out annual reviews,” he said.

The Reserve Bank also weighed in, with Deputy Governor Innocent Matshe affirming the central bank’s role in safeguarding financial stability through stricter AML/CFT supervision. “The Central Bank doesn’t do this for its own benefit. It does this for the benefit of our economy and ultimately for the benefit of each and every Zimbabwean,” Matshe said.

Zimbabwe was removed from the Financial Action Task Force (FATF) grey list in 2022, but officials cautioned that the 2026 review leaves little room for complacency. “Although the country assessment is already around the corner, let us use the precious time between now and the assessments to redouble efforts… to give the country a chance for the best rating possible,” Matshe added.