The Reserve Bank of Zimbabwe’s fight against dirty money has put car dealerships under the spotlight of the bank’s Financial Intelligence Unit amid revelations that automobile trading ranks high across all risk metrics.
FIU director general Mr Oliver Chiperesa warned that the sector had become the single most vulnerable spot in the country’s financial system.
“The national risk assessment is a vital instrument in identifying, prioritising and understanding risks associated with money laundering, which emanates from both within and outside our borders,” said Mr Chiperesa.
Mr Chiperesa also chairs the National Task Force on anti-money laundering (AML)/combating the financing of terrorism (CFT) and countering proliferation financing (CPF).
He said the just-completed third National Risk Assessment (NRA), covering the period November 2023 to November 2024, rated Zimbabwe’s overall money laundering (ML) risk at medium, pointing out that car dealers stood out as one industry with the highest risk ratings.
According to the NRA report, 95 percent of sampled car dealers import vehicles and trade exclusively in United States dollar cash.
This cash-heavy system, combined with the sector’s lack of licencing or supervision, makes it fertile ground for criminals looking to launder proceeds of smuggling, corruption and tax evasion.
Between 2019 and 2023, the country’s vehicle population jumped by 25 percent, from just over 1,23 million cars to nearly 1,6 million, creating what investigators describe as a growing cash bazaar for illicit money.
“Car dealers remain unregulated. The cash-intensive nature of their transactions makes it difficult to trace the source of funds,” the NRA warns.
Out of the 14 sectors assessed by the bank, car dealers were the only sector categorised as high risk in all three areas of threat rating, vulnerability rating and money laundering risk.
The sector is followed by real estate agents and precious metals and stones, which both rated medium-high risk across three measured metrics.
The 2024 assessment identified smuggling (US$920 million), illegal gold and precious metals trading (US$880 million), corruption (US$730 million), fraud (US$500 million) and tax evasion (US$300 million) among the top drivers of dirty money.
Together with drug trafficking, these crimes generated an estimated US$6,15 billion over the past five years, about 3,4 percent of Zimbabwe’s GDP.
Mr Chiperesa stressed that the NRA was not just about exposing risks but also about shaping stronger defences.
“By undertaking this third NRA, Zimbabwe is not only aligning with international standards but also reinforcing the country’s commitment to safeguard the safety and integrity of the nation as well as the global financial systems,” he said.
Despite being the backbone of financial transactions, the banking sector was rated medium risk, with a low threat level but a medium-high vulnerability score. Products most at risk included corporate banking, private banking, trade finance and SME lending.
The report acknowledged progress in compliance.
Most banks have strengthened customer due diligence and suspicious transaction reporting systems, while regulators have sharpened risk-based supervision. But weaknesses remain. Banks’ compliance departments were found to be under-resourced, and sanctions for non-compliant institutions were described as inadequate.
Recommendations to address potential risks and threats include bolstering staff capacity at both commercial banks and the Reserve Bank of Zimbabwe’s supervisory unit, and introducing tougher penalties for breaches.
The securities sector was rated medium-low risk, largely due to its reliance on electronic transactions. However, new instruments such as contracts for difference (CFDs) on the Victoria Falls Exchange were flagged as medium-high vulnerability.
The insurance industry also came out as medium-low risk, thanks to limited cash exposure and the establishment of a dedicated AML/CFT unit at the Insurance and Pensions Commission. Still, the unit is under-resourced, and insurers face pressure to strengthen compliance.
Real estate agents, much like car dealers, were rated medium-high risk due to their exposure to high-value cash transactions. The Estate Agents Council has improved awareness of anti-money laundering obligations, but compliance remains patchy.
The NRA urged the council and the FIU to allocate more resources to monitoring the sector, step up suspicious transaction reporting and enforce deterrent penalties.
Dealers in precious metals and stones were rated medium-high risk, reflecting widespread potential risks associated with smuggling and illegal gold trading between 2019 and 2023.
The report noted that awareness of AML obligations in the mining sector is low and recommended tighter controls at border posts, increased capacity for the Ministry of Miness and stronger enforcement against rogue dealers.
Lawyers were assessed as medium risk, with particular vulnerabilities in handling real estate transactions and managing trust accounts. Some firms were found to act as intermediaries for opaque company structures that can disguise beneficial ownership.
The Law Society of Zimbabwe has now made AML training mandatory before lawyers renew their annual practicing certificates, a step praised in the report. But the NRA warned that the sector still reports far fewer suspicious transactions than expected given its risk profile.
Separate thematic assessments flagged environmental crimes, particularly illegal mining and forestry, as medium-high risk. Tax crimes were rated medium, with the informal economy and cash businesses singled out as hotspots for evasion.
Meanwhile, virtual assets such as cryptocurrencies are still little used in Zimbabwe, but the NRA called for urgent regulation of virtual asset service providers. Non-custodial wallets were found to pose the highest risk of being misused for laundering or terrorist financing.
The findings will underpin Zimbabwe’s Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Strategy for 2025–2029, which will tighten oversight of high-risk sectors, plug loopholes in gold and car trading, and demand stricter compliance from real estate and professional services.
“All relevant stakeholders in the AML/CFT value chain need to be guided by the results of the assessment in undertaking institutional or sectoral risk assessments and deploying mitigatory measures,” Mr Chiperesa said.
The NRA process drew participation from over 80 public and private institutions and lasted 12 months.
Authorities say the upcoming five-year AML/CFT strategy will zero in on these sectors, with measures including compulsory licensing, tighter supervision, and tougher penalties. – Herald