Money laundering is the illegal process of making large amounts of money generated by criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source. Since 2003 banknotes have been unable to keep pace with inflation and as a result in 2016 bond notes were introduced in order to meet the ever-increasing demand for cash. Bond notes have created their own legal and practical problems, some of which are connected to money laundering, which has had a negative impact on economic growth and financial performance. Money laundering damages financial sector institutions critical for economic growth, promoting crime and corruption that slow economic growth, reducing efficiency in the real sector of the economy. Money launderers often funnel illicit funds through associates' cash-generating businesses, or by inflating invoices in shell company transactions.

Individuals and corporations stand to gain more by dealing in illegal markets, especially the foreign exchange market. Large corporate entities, including organisations affiliated with the fiscus, have raised foreign currency in illegal markets in order to survive. To do this they have typically falsified records, which creates a fertile ground for a wide range of illegal activities since the audit trail is conveniently eradicated. According to Zimbabwe Deep dive 2020 the total estimates for criminal proceeds combined of 9.5 to 11.5% of GDP. Released on September 13, 2021, the 10th Basel anti-money laundering index showed Zimbabwe scored 6,78 out of 10 (where 10 indicates the highest risk level). Zimbabwe’s risk score increased since 2020, mostly due to higher risks of human trafficking, Tax evasion, smuggling, corruption, fraud, drug trafficking and money laundering cost Zimbabwe US$3 billion every year (Financial Intelligence Unit, 2020).   

The most common types of crimes considered to be the major source of illegal proceeds in Zimbabwe are:

• Drug trafficking;
• Illegal trade and smuggling of precious minerals, metals and stones;
• Parallel market activities involving foreign currency and commodities by individuals and companies
• Corruption, in particular practices in the fuel industry involving both private and public institutions;
• Misrepresentation of quality, nature and value of exports;
• Armed robbery and theft of motor vehicles and stolen vehicle re-registration
• Tax Evasion
•  Human Trafficking

Drug Trafficking

According to the Organised Crime Index, the “illicit drugs markets in Zimbabwe have a moderate influence, in particular the illicit trade in synthetics and cannabis. They are sold in and smuggled to other countries with an estimated annual loss of US$360 million.

Illegal Wildlife Trade (IWT)

IWT involves the illegal trade, smuggling, poaching of protected wildlife, which goes hand in hand with tax evasion, corruption and money laundering. Poaching and illegal trade in elephants and rhinos has increased significantly in recent years due to an increase in prices of ivory/kg in China, price of a kg ranging between US$150-US$200, and on average 1 tusk of an elephant weighs 23-45Kg.

Parallel Market Activities (PMA)

Proceeds generated from parallel market operations appears to have increased with the scarcity of foreign exchange. One of the most critical damages of black market to be determined is its negative effect on income distribution. Although the negative impact of the decline in income sources and the differentiation in income distribution is difficult to measure, it is also challenging to compensate for social damage. The gap between individuals in terms of income distribution increases the tendency to commit crimes and makes money attractive. The government is fighting to bring the PMA to an end especially by the introduction of gold coins, keeping the rates stable.

Corruption

Corruption contributes about 5% of illicit financial flows. Zimbabwe was losing at least US$1 billion annually to corruption, according to Transparency International Zimbabwe (TIZ 2016),

Human Trafficking

It generates much income which is disguised before introduced into the legitimate financial system. Zimbabwe traffickers have exploited men, women and children in return of money which has generated an average amount of US$34M annually.

Tax Evasion

Revenue from taxes has most significant share in public revenues, it will raise the possibility that public revenues will not meet the public expenditures resulting in, budget deficits. Income generated by black money is earnings that countries do not tax. According to National Risk Assessment tax evasion is estimated at US$340 million.

Illegal Mining

Zimbabwe is generously endowed with natural resources such as diamonds, coal, gold, etc. Gold is reportedly smuggled out of Zimbabwe, primarily to South Africa, with higher prices and currency risk management being major motivating factors with estimates of losses to Zimbabwe at US$180 million a year.

Armed Robbery          

Crime rates in the 2 years to 2021, have jumped with housebreaking, robbery and theft increasing by close to 50%, as economic conditions have worsened. It is typically motivated by the desire to obtain money, which is then often used to purchase drugs, promoting drug trafficking.