Uganda survived being blacklisted by Financial Action Task Force (FATF) for money laundering, terrorist financing and proliferation financing, but maintained its place on the grey list together with 22 other countries. From Africa ,6 countries namely; Burkina Faso, Mali, Morocco, Senegal, South Sudan and Uganda have been identified to have deficiencies in their legal and institutional regimes to counter money laundering. Only two countries; North Korea and Iran are blacklisted by FATF.
The FATF is an inter-governmental policymaking body that determines Anti-Money-Laundering (AML) and Countering the Financing of Terrorism (CFT) standards to safeguard the global financial system.
Money laundering is the act of concealing, disguising, converting, transferring or removing criminal property and making it appear to have come from a clean source. Money referred to as “dirty money” because it is from criminal activities is ‘cleaned’ through a process of investing it into business activities deemed legitimate.
The motive is to disguise the source of the money. In Uganda, money launderers have targeted the real estate business, buying properties like land and apartments to clean the dirty money and get it into the financial system. Other avenues of cleaning have involved investing in gambling businesses like casinos, buying luxury cars and boats.
Sydney Asubo, the Executive Director of Financial Intelligence Authority (FIA) identifies five sectors placed under the Authority’s microscope and these include; gambling, real estate, minerals, legal and accounting firms.
For instance, in the Financial Year 2021/2022, Uganda earned $2.2 billion from gold export, much more than the available quantities in the country to warrant those earnings. One doesn’t have to look very far to identify the source of the mysterious Ugandan gold, given our long-standing interests and activities in Democratic Republic of Congo. The same path has provided an avenue for money laundering to flourish though dealing in Gold.
Whereas the decision by FATF to maintain Uganda on the grey list came as relief for Ugandan authorities. It’s not yet eureka for a country that is riddled with corruption. Being on a grey list means that there are serious gaps within the institutional and legal regimes meant to combat money laundering and terrorist financing, that should be addressed.
In essence, Uganda is now under increased monitoring to check its progress on measures against money laundering and terrorism financing. Some of the insoluble grains within Uganda’s institutional and legal regime include the weaknesses in enforcing anti-money laundering laws, and the unpoliced ‘corridors’ for money laundering to flourish.
The main legislation on money laundering is the Anti-Money Laundering Act 2013.To date only one case has been successfully prosecuted in courts of law using the Act. This is the case involving Serwamba David Musoke and 6 others convicted for embezzling $1.45 million from the accounts of two Southern Sudanese nationals.
In contrast, according to a report by Global Financial Integrity (GFI) and Advocates Coalition for Development and Environment (ACODE), Uganda annually loses an estimate of UGX 2 trillion ($550m) in illicit financial flows including money laundering. These grim statistics indicate that money laundering in Uganda continues to thrive un detected and where detected unpunished.
Uganda’s biggest undoing in the fight against money laundering is the corruption that has prevailed and grown leaps and bounds under the auspices of the NRM regime. The leading protagonists of predicated financial crimes largely subscribe to the ruling political party NRM and are protected by the same party and using state machinery.
Yona Wanjala the, Certified Anti- Money Laundering Specialist and the Executive Director of Defenders Protection Initiative asserts that, “it is very difficult within Uganda’s context to engage in illegal and corrupt businesses, and thrive without protection from the state”. Adding that, “such businesses are in the category of predicate financial crimes”.
In the last 15 years, at the helm of the NRM leadership, corruption levels in Uganda have grown exponentially amidst a raft of anti-corruption laws and institutions. The last decade has seen the blossoming of illicit activities like drug trafficking, human and organ trafficking, and illegal wildlife tracking. It’s through these illicit activities that money laundering has flourished with perceived protection of perpetrators.
Proceeds from such predicate and illicit crimes have been suspected to end up financing politics in exchange for immunity and business opportunities. One of the obscure sources of campaign financing in Uganda to political candidates and political parties is from illicit activities including money laundering. It’s thus not by mistake that Uganda is on the grey list for money laundering and a good candidate for getting onto FATF’s black list.
Uganda being on the grey list should be a major concern for a number of reasons. Firstly, in essence transactions originating from Uganda or made through Uganda’s financial system including cash will be subject to more scrutiny by the international systems. This will result in delays to conclude business transactions increasing turnaround time and transaction costs.
Secondly, Uganda risks being expunged from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), an undesirable situation that can plunge the economy. SWIFT is the global financial system that allows the smooth and rapid transfer of money across borders. Because we live in a global village, and trade globally, this is the last place we want to be in where we can’t use dollars or euros to transact.
Already WorldRemit—a digital payments service that provides international money transfer and remittance services in more than 130 countries and over 70 currencies, IN June severed its ties with Uganda and no longer facilitates outbound transactions. This means that Ugandans can’t use WorldRemit services to send money from Uganda but can still receive money from abroad.
Thirdly, given that major financial institutions like the IMF and World Bank are affiliated with FATF as observers, Uganda risks facing complications in accessing international lending instruments. Even when there are no economic sanctions imposed, the due diligence required before Uganda can access loans from major financial institutions makes such loans unpalatable with tighter conditions.
Uganda’s slippery path to combat money laundering will require aggressive actions that are hugely dependent on the expressed and demonstrated political will. Investigating and prosecuting the perpetrators will involve the President to remove immunity from the perceived friends, kith and kin. Understandably, Ugandans stand much to lose when our position remains on the grey list.