RESOURCE MATERIAL SERIES No.76

CORPORATE CRIME AND THE CRIMINAL LIABILITY OF
CORPORATE ENTITIES IN MALAWIMcSyd Hubert Chalunda*

I. INTRODUCTIONIn criminology, corporate crime refers to crimes committed either by a corporation (i.e, a business entity
having a separate legal personality from the natural persons that manage its activities), or by individuals that
may be identified with a corporation or other business entity.1 The individuals are so much in command of
the corporation that their acts are treated as if they were acts of the corporation as in the case of Lennard’s
Carrying Co. v Asiatic Petroleum Co Ltd.2 Corporate crime overlaps with white-collar crimes because themajority of individuals who may act as or represent the interests of the corporation are employees orprofessionals of a higher social class. It further overlaps with organized crime because criminals can set up
corporations either for the purposes of crime or as a vehicle for laundering the proceeds of crime.3 Everycountry in the world has faced corporate crime of one type or the other. The countries have different ways
and legislation of dealing with corporate crime and Malawi is not an exception. This paper, therefore, will
examine and analyse the current situation, problems and challenges in the investigation, prosecution andtrial of corporate crime in Malawi.

II. CRIMINAL LIABILITY AND CORPORATE CRIMINALIZATION IN MALAWI
A. Liability of Legal Persons
1. Criminal Liability of Corporate Entities in Malawi
In Malawi, upon incorporation, a company attains the status of a body corporate with a personality of its
own distinct from that of its members and its management.4 As a result of this distinction, liability incurredby a company is its responsibility and not that of the shareholders. In Naidoo v Mazi Import & Export Ltd
and Tchongwe,5 the plaintiff and the second defendant formed a limited company of which they became bothshareholders and directors. Subsequently, the plaintiff incurred some expenses in the company’s name andwanted them recovered from the two defendants. It was held that as the company was a distinct person,
separate from the second defendant, the expenses could be recovered from the company and not from thesecond defendant as well.
In Malawi, the law recognizes that a company has dual identity as an association of persons6 which
requires that for a company to be formed there should be an association of at least two persons and a person
which is distinct from its members. In the latter case, it is recognized that it requires human agency to fulfill
the mission and carry out the business of a corporate entity. Consequently, while in many cases the activitiesof the company will be identified with it as a person, there are instances where the law will hold its members
or officers responsible for its actions as to hold otherwise would lead to absurdities.
2. Legal Framework of Criminal, Civil and Administrative Sanctions
Corporate entities in Malawi are criminally liable for some offences and are not for others. The companies
will be held liable for offences committed under the Money Laundering, Proceeds of Serious Crime andTerrorist Financing Act, 2006, Environmental Management Act, Capital Market Development Act and Workers* Senior Investigations Officer, Anti-Corruption Bureau, Lilongwe, Malawi.
1 http://en.wikipedia.org/wiki/Corporate_crime
2 (1915) AC 705.
3 http://en.wikipedia.org/wiki/Corporate_crime
4 Section 15(2) of the Companies Act, 1984.
5 Civil Case No. 706 of 1985.
6 Section 4 of the Companies Act, 1984.

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Compensation Act.
The corporate entities are also liable in tort and contract separate from its directors and shareholders
once they are incorporated under Section 15(2) of the Companies Act. As a result they can enjoy rights, own
property, sue and be sued in their own right, and not as agents or trustees for their members. Lord
Macnaughten made this point very eloquently in the classic case of Salomon v Salomon7 when he said, “Thecompany is at law a different person altogether from the subscribers to the memorandum; and, though it may
be that after incorporation the business is precisely the same as it was before, and the same persons aremanagers, and the same hands receive the profits, the company is not in law the agent of the subscribers ortrustee for them.”
Since the companies are separate legal persons under Section 15(2) of the act, they are amenable to any
administrative action the state may want to take against them separate from their directors and shareholders.

III. CURRENT SITUATION OF SOME CORPORATE CRIMES IN MALAWI
A. Money Laundering
Money Laundering, Proceeds of Serious Crime and Terrorist Finance Act, 2006 provides inter alia for theoffence of money laundering. Parliament enacted this law in 2006. It was gazetted recently and it is now
operational under Malawian law.8 This piece of legislation criminalizes an act of money laundering under
Section 35 of the act. According to the said section, an offence of money laundering is said to have beencommitted if a person knowing or having reasonable grounds to believe that any property in whole or in part
directly or indirectly represents any person’s proceeds of crime(i) converts or transfers property knowing or having reason to believe that the property is the proceedsof crime, with the aim of concealing or disguising the illicit origin of that property, or of aiding any
person involved in the commission of the offence to evade the legal consequences thereof;(ii) conceals or disguises the true nature, origin, location, disposition, movement or ownership of thatproperty knowing or having reason to believe that the property is the proceeds of crime;(iii) acquires, possesses or uses that property, knowing or having reason to believe that it is derived,
directly or indirectly, from proceeds of crime;(iv) participates in, associates with or conspires to commit, attempts to commit and aids, abets andfacilitates the commission of any act or omission referred to in (a), (b) or (c).
In the event that a corporate entity is convicted of the same, the punishment is a mandatory fine of
MK10,000,000 (Malawi Kwacha) and automatic loss of business authority. However, the law on money
laundering has not been tested in courts because it is relatively new. Money laundering was on the increasein Malawi because there was no law to regulate the crime. Secondly, the offence is most of the timecommitted together with corruption which is a serious problem in Malawi. Despite the act being enacted lastyear, there are some big money laundering cases involving some companies currently being investigated in
the country.

B. Terrorist Financing
The same Money Laundering, Proceeds of Serious Crime and Terrorist Financing Act, 2006 which is anomnibus piece of legislation, addressing issues of money laundering and proceeds of serious crime, also
provides for the offence of terrorist financing. According to Section 36 of the Act, the offence of terrorist
financing is committed when a person who, by any means whatsoever, engages in terrorist financing
activities. In the event that a corporate entity is convicted of the offence, the law provides for a mandatory
fine of MK15,000,000 and an automatic loss of business authority. There is no registered case so far in
Malawi on terrorist financing.
C. Tax Evasion
The offences of tax evasion are provided for under the Customs and Excise Act, Cap 42:01 of the Laws ofMalawi. Tax evasion is the most frequently committed offence of all economic crimes in Malawi because
7 (1897) AC 22.
8 Section 74 of the Constitution of the Republic of Malawi.

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Malawi has a small economy. As a result, most of the companies would like to pay as little tax as possible inorder to maximize their profits. Evading tax is seen as a way of achieving that goal.
In terms of corporate entities, the relevant provision is Section 141 of the said act. The section provides
that a company will be held liable if any of its directors, managers or secretaries contravene any of thecustoms laws. In such a scenario, the company may be charged with tax evasion. Upon conviction, thepenalty is a fine of not less than three times and not more than ten times the amount of tax which was
supposed to be paid or imprisonment for three years.9 Tax evasion offences are most of the time settled outof court after the accused has been fined and paid the required money to the government. However, somecases end in trials. The fine is determined by the Commissioner General of the Malawi Revenue Authority
which has an investigative department that investigates tax evasion.

D. Submission of Securities Reports Containing False Information, Market Manipulation and Insider
Trading
The Capital Market Development Act, 1990 criminalizes the submission of securities reports containing
false information,10 market manipulation,11 and insider trading.12 In the event of a conviction on any of theabove offences, a person is liable to a fine of MK10,000 and to imprisonment for two years. Under thislegislation, a corporate entity can be prosecuted and fined while its directors who are acting on its behalf
may be imprisoned. Noting the shortfalls in the act and other ancillary acts like the Companies Act, 1984 in
respect of regulating the securities market, the government has proposed an amendment bill with the aim oftaking into account the shortfalls. The current act is not comprehensive and the penalties contained therein
are very minimal in today’s value.
E. Fraud
The law on corporate fraud is provided for in the Penal Code under Section 333. It does not target thecompany as a corporate body but its directors and other officers of the corporation. Upon conviction, aperson is liable to imprisonment for seven years. Corporate fraud is not common in Malawi.
IV. INVESTIGATIONS
A. Specialized Investigative Authorities and Training Methods in Malawi
In Malawi there are two authorities that are mandated to investigate any corporate crime, namely the AntiCorruption Bureau (ACB) and the Fiscal Department of the Malawi Police Force. The Anti-Corruption
Bureau was created by an Act of Parliament in 1995 called the Corrupt Practices Act (CPA)13 to investigate all
alleged or suspected corrupt practices in both the public and private sectors.14 The Act was amended in 2003
giving the ACB powers to investigate any crime that may be disclosed in the course of investigating
corruption, hence the investigation of corporate crime. The Fiscal Police is a department within the Malawi
Police Service which was created by the Republic of Malawi Constitution. 15 The two institutions are
independent of each other and have different ways of training their investigations officers. However, in someinstances the two institutions conduct training of their officers together, like in the Financial Investigations
and Computer Evidence Course.
In both institutions, the officers undergo a mandatory investigative skills course when they are recruited.
Thereafter, they are trained on the job whereby they are attached to an experienced officer in order to have ahands on approach to the art of investigation. After six months, the officers undergo an Advanced Investigative
Skills Course for four weeks. They are then paired with an experienced officer to start actual investigations.
During the course of their work, some are attached to sister institutions within Southern Africa to learn how
investigations are conducted in other countries, like Zambia, South Africa, Botswana and Tanzania. The training
of officers is a continuous process. The officers are further trained in the United Kingdom, United States of
9 Section 142 of Customs and Excise Act.
10 Section 41 of Capital Market Development Act.
11 Section 37 of the Capital Market Development Act.
12 Section 37 of the Capital Market Development Act.
13 Section 4 of the Corrupt Practices Act.
14 Section 10(1)(b-h) of the Corrupt Practices Act.
15 Section 152 of the Constitution of the Republic of Malawi.

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America, South Africa and Botswana, among other countries. The main emphasis is in specialization of theofficers in specific crimes like computer forensic analysis, financial investigations, money laundering, banking
fraud, undercover operations and surveillance.

B. Co-operation between Investigative Authorities in Malawi
As earlier explained, the two investigative authorities conduct their own investigations. However, there
is always co-operation, co-ordination and sharing of information as far as big and complex investigations areconcerned. In some instances, officers from the two institutions form a task force (team) to investigate acase. A case in point is the Investigative Team which has been formed recently among ACB, Fiscal Police
Officers, Malawi Revenue Authority (MRA) and Reserve Bank of Malawi (RBM) officers. It is involved in theinvestigation of a money laundering case involving four shell companies. This happens frequently when needarises. There is a clear understanding between the investigative authorities because their end goal is to deal
with the crime and their co-operation, co-ordination and information sharing is of vital importance, especiallyin huge corporate crimes.
C. Acquisition of Information on Corporate Crime
The mode of acquiring information on corporate crime at both the ACB and the Fiscal Police is the same.
The information is obtained in any of the following ways:
•
•
•
•
•

People going to the institutions in person to lodge or give information if they suspect that a crime
has been committed by any corporate entity or directors or managers of the said entities;
People can phone the institutions, write a letter, e-mail or fax the allegation of the crime;
The print media often write about any corporate crime that may come to their attention. The two
institutions may use the information in those articles as a basis for commencing an investigation;
The police have confidential informants who sometimes give them information about an alleged
crime. However, the ACB does not have confidential informants even though people are free toremain anonymous after giving information;
Whistleblowers are also a source of information for the two institutions. The whistleblowers areprotected by Section 51A of the Corrupt Pratices Act. It is an offence to take any action of any kindto punish or victimize a person solely because he or she has been a whistleblower or informer.

D. Material and Electronic Evidence
In modern times, where there is advancement of technology, more often than not investigators encountera scenario where they are required to identify, obtain and preserve electronic evidence. All investigators at
the ACB and a good number at the Fiscal Police have been trained in basic skills of obtaining and preserving
such evidence. However, computer data, recovery of deleted data and forensic analysis is left to thecomputer experts and not the investigators. In isolated cases, there might be outsourcing of expertise on therecovery of deleted computer data and forensic analysis. It is mainly done by United Kingdom computer
experts. This, however, has huge financial implications as the services are always expensive.
E. Obtaining Statement Evidence
1. Interrogation Techniques
The investigators are well equipped during training with techniques of obtaining statements that containrelevant and sufficient information which will prove the case in court or lead to further line of inquiry during
the investigation. Statements are taken during the interrogation time. Investigators are taught techniques ofinterrogations that will lead to the interviewee disclosing whatever the investigator wants from him or her.
Interrogation is always conducted through open questioning in the presence of a lawyer.
2. Plea Bargaining
The law in Malawi does not provide for any plea bargaining between the State and the accused person.
However, prosecutors treat each case depending on the available evidence. They may, for example, use oneof the accused persons as a witness against the other. In such a case, the accused is charged, enters a plea of
not guilty and the charges are then dropped against him or her.16 This only happens if the prosecution does
not have other evidence to prove the case apart from the evidence of one of the accused persons.
16 Section 81B of the Criminal Procedure & Evidence Code.

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3. Immunity of Investigators
The investigators at the ACB are immune from any action or proceedings for any act or thing done oromitted to be done in good faith in the exercise of their duties.17 The same applies to Fiscal Police officers.

V. PROSECUTION IN MALAWI
A. Mitigating Punishment of an Accused Person
In Malawi, there is no specific law or provision relating to lighter punishment in respect of an accused
person who provides substantial co-operation in the investigation and/or prosecution of an offence. However,the prosecutor has the discretion to charge the accused person with a less serious offence if he or she has
assisted in the investigation and/or prosecution. The discretion only arises if there are alternative offences
to the serious offences committed by the accused. The facts of the case, therefore, must fit in the lesser
offence for discretion to be exercised.
B. Granting of Immunity to Co-operating Persons
In the case of a co-operating accused person whereby the case can not be successfully prosecutedwithout him or her being the state witness, prosecution proceeds on the basis of Section 81B of the Criminal
Procedure & Evidence Code. In such cases, soon after the accused person has entered plea of not guilty, thecharges are withdrawn against him or her, leading to his or her acquittal. He or she then is turned into astate witness against the other accused persons. Immunity from prosecution is only granted when the state
can not dispense with the person as a state witness.
C. Considerations in the Prosecution of a Corporate Entity
Under the Malawian laws which distinguish a company as a separate legal entity and under the prevailingprinciple of Salomon v Salomon ,18 a corporate entity can be prosecuted for some offences, like money
laundering and terrorist financing, while they can not be prosecuted for others, like fraud and tax evasion. In
the latter scenario, the law allows the prosecution of its directors.
VI. TRIAL AND ADJUDICATION
A. Disclosure of Evidence
Criminal trials in Malawi can be initiated either in the subordinate courts or in the High Court.19 Corporate
crimes are initiated in the subordinate courts where the rule of disclosure of evidence does not apply.
However, the Director of Public Prosecution (DPP) can commit any case to the High Court from thesubordinate Courts.20 Corporate crimes are frequently committed to the High Courts due to their complexity.
In the High Court the disclosure of evidence applies as a matter of practice and not as requirement by law.
One can ably say that it is a silent rule.
B. Clarification of Disputes before the Trial
In Malawi, clarification of any disputes before trial is commonly known as Preliminary Objections and isdone under Section 151(2) of the Criminal Procedure & Evidence Code. One normally objects to the charge
and there are several circumstances under which it can be done:•••

if the charge is defective either in substance or form;
if the evidence discloses an offence other than the offence with which the accused is charged;
if the accused desires to plead guilty to an offence other than the offence with which he/she ischarged.

The accused is at liberty to object to any matter at the initial stage before trial commences. Should an
accused person fail to raise these at the trial court, he or she is estopped from raising them on appeal according
to the Malawi Supreme Court of Appeal ruling of Republic v Lucius Chicco Banda.21 Any clarification must be
17 Section 22 of the Corrupt Practices Act.
18 Supra Note 6.
19 For Treason under Section 38 of the Penal Code and Murder under Section 209 of the Penal Code which are only tried in

the High Courts.
20 Section 289 of the Criminal Procedure & Evidence Code.
21 Malawi Supreme Court of Appeal, Criminal Appeal No. 1 of 2007.

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made before the first witness is called.

C. Effective Methods of Fact Finding
1. Witness Protection
There is no witness protection law in Malawi except under Section 51 of the Corrupt Practices Act which
provides for the protection of whistleblowers. This provision only protects whistleblowers who have provided
information to the Anti-Corruption Bureau. As such, our laws are lacking as far as witness protection isconcerned.
2. Expert Witnesses
An expert witness may be allowed to state his or her opinion on a matter related to his or her expertise.
Section 190 of the Criminal Procedure & Evidence Code provides that the opinion of experts may be sought,“Upon a point of foreign law, or of science or art, or as to the identity of handwriting or finger-prints.”
Section 190 is couched in wide terms and would appear to cover any matter which is the subject ofspecial knowledge.22 The section defines an “expert” as any person “specially skilled” in a particular field. It
is for the court to determine a person’s competency as an expert before his/her evidence is admitted. The
expert may give his/her evidence both in the subordinate and High Court.

D. Sentencing Process
The courts pass sentences on the accused persons after they have heard the prosecution on theantecedents and also the accused persons in mitigation. The courts hear the antecedents and pleas in
mitigation following a conviction in the subordinate court and High Court under Section 260 and 321(J) of the
Criminal Procedure & Evidence Code. Under Section 12 of the Code, any court may pass any lawful sentence
combining any of the sentences which it is authorized to pass, subject to the court’s general jurisdiction
under Section 14 of the same Code. Different considerations are taken into account depending on thecircumstances of the case. The statute, therefore, only gives what are maximum or minimum sentences towhich the offender is liable.
VII. INTERNATIONAL CO-OPERATION
A. Problems and Challenges in Investigations, Prosecution and Trial
In most cases, the investigations conducted by ACB require conducting investigations and obtaining ofevidence in foreign countries. This is so because the perpetrators of the crime always transact with foreigncompanies and organizations. The two countries from which Malawi most of the time requires assistance ininvestigations are the Republic of South Africa and the United Kingdom. Malawi conducts its businessmainly with these two countries.
The ACB does not have a direct link with foreign investigative authorities who can assist in investigating
its cases. When the ACB would like to conduct foreign investigations, it uses the Police Service through its
Interpol department to arrange that its (ACB) officers are allowed entry and power to investigate in foreigncountries, hence the incorporation of a police officer in all foreign investigations. However, there is a goodand strong partnership between the ACB and similar institutions in other countries like Zambia, Tanzania,
Botswana and South Africa who greatly assist whenever we need to get information from the respective
countries. The ACB has assisted many countries when they would like to investigate in Malawi. Some of thecountries on whose behalf the ACB has conducted investigations are Zambia, the United Kingdom, South
Africa, Botswana, the United States of America and Australia. At the moment, there is an ongoinginvestigation in which the Australian Police has requested the ACB to assist them in investigating an
Australian company that is suspected of involvement in shady deals. The company is investing in Malawi.
The ACB has assigned a team of investigators to conduct the investigations. In 2004, the ACB assisted
investigating a case in which the North West Regional Asset Recovery Team (RART) of Lancashire
Constabulary investigated a case of money laundering. With the evidence collected by the Malawi Team andpassed to the UK, the accused persons were charged in the UK and pleaded guilty and were convictedaccordingly. The RART confiscated approximately 2.9 pounds of property from the convicts.
22 Eg. Opinion of expert in computer forensics, like in the case of Rep v Dr Bakili Muluzi.

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The foreign investigations have their setbacks. Topping the list is the financial constraint involved in thewhole process. They are very costly and Malawi being a third world poor country can not afford to conduct
all the investigations at the needed time and in the required manner. As a result of this, these investigations
are sometimes stalled by the mere fact of lack of financial resources. Secondly, the process of obtaining
information or being allowed to investigate in another country is very frustrating. Some countries are of theview that we are wasting their time as they have their own work to do. The matter becomes complicated if
you do not know a person who can assist in the country you intend to obtain information from. It is mucheasier for a foreigner to obtain information or investigate in Malawi than the other way around. We are notrigid in accommodating international investigators.
The ACB has made its officers available if they are needed during prosecution and trial in any country
where their services are required. A case in point is the UK case mentioned above. The ACB has also been
assisted by other countries, especially the UK and South Africa, during prosecution of our cases. They havemade available their personnel to testify in our courts. The only problem is the same issue of financial
constraints when it comes to pay for their travel, accommodation and upkeep expenses.

B. Problems and Challenges in Obtaining and Providing Mutual Legal Assistance
Mutual Legal Assistance in Malawi is provided by the Attorney General through the Ministry of Foreign
Affairs and International Co-operation. Any mutual legal assistance required from Malawi should also go to
the Attorney General through the Ministry of Foreign Affairs and International Affairs. The process is notwithout problems and challenges. The major one is that the process is long and frustrating. It can take a year
before a request is honoured. A quicker and simpler process could have been of much more help than thecurrent one.
C. Problems and Challenges of Other Types of International Co-operation
Malawi has been involved in several joint investigations with other countries like the UK, South Africa,
Zambia, Kenya and Tanzania. There is always great co-operation and understanding during these operations.
The only problem and challenge is the same matter of financial constraints of some of the countries. On topof the joint investigations, Malawi is in constant touch with other countries and does exchange relevant
information on corporate crimes in the respective countries.
VIII. CONCLUSION
Corporate crime is one of, if not the most, complex of economic crimes in modern times. The advancementof technology has aggravated the complexity of the crime in terms of uncovering it. Technology has also madeit easy for some corporate entities to commit the crime. Every country in the world is faced with this crimein one way or the other. Bearing this in mind almost all countries have put in place different ways andlegislation to regulate and curb the vice. However, legislation alone is not sufficient. There is great need for
closer co-operation among the investigative and prosecution authorities in the world to join hands in thefight. The investigators and prosecutors who are at the forefront of uncovering the crime and prosecuting
the offenders should be well equipped with the latest skills to enable them do the job with utmost
competency and ability.

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