UGANDA
Summary
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Sanctions

None

FAFT AML Deficient

Yes and deemed not to be making sufficient progress

Higher Risk Areas

 

Compliance with FATF 40 + 9 Recommendations

Not on EU White list equivalent jurisdictions

Corruption Index (Transparency International & W.G.I.)

Failed States Index (Political Issues)(Average Score)

Medium Risk Areas

World Governance Indicators (Average Score)

Weakness in Government Legislation to combat Money Laundering


 

ANTI-MONEY LAUNDERING

 

FATF Status

Uganda is on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

FATF Statement - 23 June 2017

Since February 2014, when Uganda made a high-level political commitment to work with the FATF and ESAAMLG to address its strategic AML/CFT deficiencies, Uganda has substantially addressed its action plan at a technical level, including by: (1) adequately criminalising terrorist financing; (2) establishing adequate procedures for freezing terrorist assets in accordance with UNSCRs 1267 and 1373, and their successor resolutions; (3) ensuring that all financial institutions are subject to adequate record-keeping requirements; (4) establishing a fully operational and effectively functioning financial intelligence unit; (5) introducing an appropriate legal basis to permit the competent authorities to provide a wide range of mutual legal assistance; and (6) ensuring that appropriate laws and procedures are in place with regard to international co-operation for the financial intelligence unit and supervisory authorities. The FATF will conduct an on-site visit to confirm that the process of implementing the required reforms and actions is underway to address deficiencies previously identified by the FATF.

 

Update on the Public Statement in Respect of the Republic of Uganda issued by the ESAAMLG Council of Ministers at its meeting in Luanda, Angola on 5th September 2014

At its 13th Meeting in Swakopmund, Namibia in September 2013, the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) Council of Ministers had raised concerns with the lack of progress by Uganda in addressing the deficiencies identified in the Mutual Evaluation Report of Uganda and the risks it posed to regional and global financial systems.

The Council of Ministers had in particular required Uganda to bring into force the Anti-Money Laundering Act, 2013 and amend the Penal Code to adequately cover the minimum list of predicate offences. The Council further required Uganda to amend the anti-terrorism law to adequately criminalise the offences of financing of terrorism in line with the FATF Standards.

At its 14th Meeting in Luanda, Angola on the 5th of September 2014, the Council of Ministers noted that the Anti-Money Laundering Act was brought into force on the 1st November 2013. The Council further notes that Uganda is in the process of amending the anti-terrorism law, and will provide a copy of the Penal Code and the relevant legislations for analysis at the March/April 2015 Task Force of Senior Officials Meeting to determine the extent to which the minimum list of predicate offences to money laundering are adequately criminalised. The Council of Ministers commends Uganda for the progress made and urges Uganda to expedite the amendments to the Anti-Terrorism law in conformity with the Financial Action Task Force (FATF) Standards and to meet its obligations under the ESAAMLG Memorandum of Understanding.

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Uganda was undertaken by the Financial Action Task Force (FATF) in 2016. According to that Evaluation, Uganda was deemed Compliant for 4 and Largely Compliant for 1 of the FATF 40 Recommendations.

ML/TF Risks and Scoping of Higher-Risk Issues- Overview of ML/TF Risks

Uganda has not yet carried out a National Risk Assessment, which might have clearly provided the crimes which are most common in Uganda and the possible amounts of criminal proceeds involved. The authorities view the crimes of corruption and abuse of public resources, fraud, smuggling of wildlife products and gold, and tax evasion as most common. Uganda has a significant informal, cash based economy. Majority of the financial transactions are carried out in cash which poses a high ML/TF risk to some of the sectors, like the real estate sector. Most of these transactions cannot be easily traced and accounted for due to the absence of paper trail, which poses additional ML and TF risks. Lack of implementation of cross-border currency and BNI controls also makes the country more vulnerable to ML & TF risks.

The capital of Uganda, Kampala has had two terrorist attacks, with the most recent one being in 2010 during the World Cup Soccer Tournament. Uganda faces the risk of terrorist attacks from the Somali, terrorist group, Al-Shabaab. The risk is further increased by Uganda sharing almost a porous border with a difficult terrain with Kenya, which has also been targeted for attacks by the same group. Some of the neighbours, like South Sudan are politically unstable. Internally, Uganda has got groups like the Lord’s Resistance Army (LRA) and Allied Democratic Forces (ADF) which, although situated outside Uganda, their operations are aimed at attacking Uganda. The risk of TF is therefore very high. The authorities seem to be concentrating on the terrorism risk and have organised structures starting from the village level to ensure that information on any suspicious activity which might be linked to terrorism is reported to the authorities. However, the extent to which the authorities carry out parallel financial investigations in such cases is negligible. No investigations on TF have been carried out yet by the authorities.

Uganda’s AML/CFT regime is relatively young. The AMLA was only enacted in 2013, whilst the amendments to the Anti-Terrorism Act to criminalise the offence of TF among other things, were enacted in June 2015. Regulations to implement some of the provisions of the amended law such as the UN Security Council Resolutions (1267/1373) are not yet in place.

The institutional framework is generally weak, with most of the agencies lacking the expertise and resources to start implementing the requirements and obligations set out in the AMLA. In addition, although it was easy to determine that there are inadequate resources and skills to deal with ML cases for law enforcement and DPPs Office, it was not clear whether the judiciary is also affected by the same problems as no test cases of ML have yet been brought before it for trial.

Judging from the number of cases of corruption that the IG deals with, over a thousand per year, it appears the offence of ML is not being pursued compared to the predicate offence of corruption. There is a high probability that the proceeds from the offence of corruption, which is prevalent with public officials in Uganda, are being laundered with the offences going undetected. It was not clear why the IG does not refer cases which have elements of ML to the DPP’s Office for further management.

Uganda does not have a proper legal framework to support AML/CFT supervision of mobile money service providers which is an area of concern and a missed financial inclusion opportunity. The stop-gap measure taken by the BoU of issuing Guidelines does not appear to be adequate as it cedes to the partner banks the responsibility to enforce compliance with AML/CFT obligations, a role which banks do not seem to be playing in practice. FIs, particularly the big banks are aware of the ML/TF risks and have taken measures to mitigate the risks but some of the smaller banks, non-banking institutions and the DNFBPs are still far off from identifying their ML/TF risks as well as implementing risk mitigating measures.

 

US Department of State Money Laundering assessment (INCSR)

Uganda was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR).

Key Findings from the report are as follows: -

 

Uganda’s banking and financial sectors are growing in size and sophistication. The country has a total of 25 commercial banks, 84 percent of which are foreign-owned, and more than 300 non- bank financial institutions. Only 20 percent of Ugandans have deposits in the formal banking sector, with the rest of the populace relying on cash transactions or alternative forms of banking. Money transfers and payments through mobile phones (M-payments), for instance, have become key providers of basic, if informal, financial services for low-income earners who cannot afford the charges levied by the formal banking system. M-payments provide needed financial services to Uganda’s unbanked population, much of which lives in remote areas of the country. Annual remittances are one of Uganda’s largest sources of foreign currency.

Uganda’s cash-based informal economy provides a fertile environment for money laundering. Its lack of intellectual property rights legislation feeds a large black market for smuggled and/or counterfeit goods. Currently, most laundered money comes from domestic proceeds, much of which stems from unchecked corruption. Real estate and casino operations are of particular concern. Uganda’s inability to monitor formal and informal financial transactions, particularly informal trade along porous borders with South Sudan, Kenya, Tanzania, and the Democratic Republic of Congo, could render Uganda vulnerable to more advanced money laundering activities and potential terrorist financing. Uganda’s black market takes advantage of these borders and the lack of customs and tax collection enforcement capacity.

 

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SANCTIONS

There are no international sanctions currently in force against this country.

 

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BRIBERY & CORRUPTION

Index

Rating (100-Good / 0-Bad)

Transparency International Corruption Index

25

World Governance Indicator – Control of Corruption

12

 

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INVESTMENT CLIMATE - Executive Summary (US State Department)

A youthful population, open markets, and abundant natural resources highlight the numerous opportunities investors can find in Uganda. While the country maintains a liberal trade and foreign exchange regime, and largely adheres to IMF/World Bank programs to fight poverty, recent developments, including the passage of the Anti-Homosexuality Act, and continuing reports of endemic corruption and financial mismanagement, have raised questions about Uganda as a destination for investment. The Government has prioritized building and improving infrastructure, including boosting energy production, lowered tariffs and trade barriers for regional trade, and generally welcomes foreign direct investment. However, sluggish bureaucracy, poor infrastructure, insufficient power supply, the low level of professional skills, slow and non-transparent decision-making processes, high energy and production costs, non-tariff barriers, corruption, and government interference in the private sector make for a challenging investment climate in Uganda. From a policy perspective, the country continues to face a number of macro-economic challenges, most notably shortfalls in revenue collection, an inability to expand its tax base, and political pressure to keep up government spending as the 2016 presidential election approaches.

Uganda has significant oil reserves - an estimated 3.5 billion barrels, including 1.8 billion that are recoverable. With only 40 percent of the oil-rich area explored, additional discoveries could boost Uganda’s oil reserves. Uganda could eventually become one of the region’s major oil producers with the commencement of commercial oil production, currently expected to begin in 2018. Power supply remains one of the largest obstacles to investment, and Uganda’s electricity network urgently needs renovation and expansion. Access to electricity countrywide is a meager 12 percent. The Government formally broke ground on the 600-megawatt Karuma hydropower project in 2013, but the project continues to be dogged by delays, and is not expected to be commissioned until 2018. In the meantime, Uganda is working to expand its power supply by constructing a number of micro-hydro projects along the Nile River and is promoting the development of sources of renewable energy.

High transportation costs are another constraint on Uganda's economy. Uganda’s dilapidated road and bridge infrastructure needs considerable investment, its railway system is in disrepair, and air freight charges are among the highest in the region A two-lane highway from Kenya remains the primary route for 80 percent of Uganda's trade, making transportation slow, costly and susceptible to disruption. Also a problem is Uganda’s reliance on Kenya’s Mombasa port, where chronic congestion increasingly results in costly delays. While Uganda and Kenya have worked to remove non-tariff barriers, resulting in quicker transit times, chronic congestion at the port in Mombasa results in costly delays. Uganda also hopes to shift more cargo transit from trucking to rail but extensive and expensive rehabilitation of existing rail lines is required before freight trains can service Uganda. Aviation continues to grow, and in 2013, passenger traffic through Uganda's Entebbe International Airport was up 8.5 percent from 2012, with more than 1.3 million travellers passing through Uganda’s only international airport.

Uganda's social services systems are lagging behind the demand generated by economic expansion and population growth. At 3.2 percent per year, Uganda's population growth rate is one of the fastest in the world, and its current total population of 35.4 million is expected to rise to 54 million by 2025. While creating potential markets for products, the country's population growth is also increasing the strain on social services, underfunded schools and hospitals, infrastructure, forests, water, and land resources. The high level of HIV/AIDS infection in the country is also taxing social services. Uganda developed a model program to combat HIV/AIDS, and prevalence rates decreased from close to 20 percent in the 1990s to 6.4 percent in 2006. However, this trend has recently shown a troubling reversal, with HIV/AIDS prevalence rising to 7.3 percent in 2012.

Uganda’s economy experienced robust growth the past decade, especially in the energy, construction, infrastructure, telecommunications and financial services sectors. After a brief slowdown, annual GDP growth is expected to approach seven percent by 2015 but there are fears that a prolonged campaign leading up to the 2016 election will lead to a lack of fiscal discipline. Inflation is creeping upwards, standing in May 2014 at about seven percent, while commercial lending rates remain well over 20 percent. Recently, GOU initiatives have focused on infrastructure investment, the promotion of Foreign Direct Investment (FDI), value-added manufacturing and increased international trade.