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Uganda still has a long way in fight against money-laundering

Executive director of the Finance Intelligence Authority, Sydney Asubo

Executive director of the Finance Intelligence Authority, Sydney Asubo

This year has not been great for Uganda in the financial sector on the international front.

On August 8, 2023, for example, World Bank issued a notice announcing that it had suspended all future funding for projects in Uganda over allegations of human rights violations following the signing into law of the March 12 Anti-Homosexuality Act.

In less than three months later, the American government, through President Joe Biden, whilst acting like the rich child who owns a soccer ball and, by virtue of that ownership, dismisses any opponent who scores against his team, wrote to the USA legislative body expressing intentions to terminate Ugandan exports to America through the African Growth and Opportunity Act (Agoa).

This termination is meant to commence in January 2024 if Uganda does not heed to USA’s demands. As a matter of fact, it was not until last week that Uganda obtained the only positive financial news this year as the Financial Action Taskforce (FATF) indicated that Uganda would be removed from the financial grey list following reforms made by the country in complying with internationally set standards on countering money laundering.

The reforms notwithstanding, Uganda continues to have gaps in its anti-money laundering regime which, if not filled, could see the country fall back into the financial grey list. In 2020, Uganda was placed on the financial grey list by FATF.

The grey list is a register that highlights countries that have significant shortfalls in tackling money laundering. These shortfalls can be legal, institutional or structural. By including Uganda on the financial grey list, it meant that Uganda did not meet the standards set by FATF to combat the legitimization of illegally obtained money.

FATF is a global inter- governmental organization started as an initiative of the G7 countries with an aim of developing policies to combat money laundering and terrorism financing. Over the last few years, Uganda has exhibited several institutional loopholes coupled with a weak legal regime that have not only encouraged money laundering but also discouraged the arrest and prosecution of its culprits.

Money laundering, in the first place, involves actions meant to disguise financial assets in order to use them without detection of illegal activities that produced them.

It involves legitimizing money or property that was obtained as a result of crime or other dubious and illegitimate actions that were done prior to obtaining that money. This is done to conceal illicit origins of that money or property to evade legal consequences of the initial crime.

These transactions often involve complicated cross-border transactions where individuals involved in crime wire money to their counterparts in Uganda. Since Uganda does not have laws that requires such money to be accounted for regarding sourcing, purpose and legality of it, Uganda becomes a hotbed for laundered money.

This is worsened by the fact that Uganda is largely a cash economy and tracing of money involved in such transactions becomes complicated once it is received in the country.

It is very common for someone to obtain millions of dollars on their known accounts without the source of that money being queried. In fact, Uganda’s laws provide that a person transporting or sending to another country any currency exceeding thirty million should disclose the money to Uganda Revenue Authority (URA) where the money is intended to be transported without passing through the normal banking/ financial procedures.

In as much as such stringent requirements are in place, the law does not require the person transporting the amounts to disclose the source of those amounts. Besides, a declaration to URA deprives the Financial Intelligence Authority (FIA) a chance to critically scrutinize the transactions and determine if the money is part of a larger ploy to launder proceeds of crime.

The core mandate of URA is to collect taxes whereas the mandate of FIA is to combat money laundering. There would be need to put in place mechanisms to ensure that there is a seamless information sharing between URA and FIA to enable a closure of such loopholes.

Additionally, the FIA does not have prosecution powers to its name. This leaves the mandate of prosecuting any one allegedly involved in money laundering to the office of the Director of Public Prosecutions (DPP). The downside of this is that DPP does not have the training, expertise and the tools to prosecute those involved in money laundering as these cases involve complex and technical financial transactions.

The FIA, which has the technical manpower, skills and expertise, only stops at investigating these crimes and, depending on the weight of the available evidence, recommends their prosecution to the DPP. This creates an institutional gap where the mandate of the FIA is watered down and subsequently, the fight against money laundering.

If Uganda were to take huge leaps forward and successfully fight money laundering, there would be need for a structural adjustment
in the legal and institutional framework by enhancing FIA’s mandate and granting it powers to investigate and prosecute any suspicious person involved in money laundering.

The writer is an advocate of the High court


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