Financial Crime World

Bank of Uganda’s Oversight and Monitoring Functions: Payment Systems

Basis for Monitoring

The Bank of Uganda (BoU) prioritizes its resources based on assessed risk levels, allocating more attention to areas with significant risks of failure, fraud, error, or other risks.

Key Considerations

  • Resource allocation is informed by a thorough analysis of potential risks and their impact on the payment systems.
  • The BoU’s oversight functions are designed to be proactive, identifying and mitigating potential threats before they materialize.

Risk Reviews

The Oversight Division conducts regular risk reviews of payment systems, analyzing key aspects:

Analytical Framework

  1. Qualitative Information: System features and operations are assessed for their impact on safety and efficiency.
  2. Quantitative Information: Statistical analysis of system flows and risk areas helps identify trends and potential vulnerabilities.
  3. Principles Observance: The current level of adherence to relevant principles is evaluated against established standards.
  4. Codes of Practice and System Rules: Compliance with central bank oversight policy and other regulatory requirements is assessed.

Sources of Information

The BoU obtains information from a variety of sources, including:

Key Informants

  1. Publicly available information on system design and performance
  2. Official system documentation (e.g., system rules, member documentation)
  3. Regular or ad hoc reporting on system activity
  4. Internal reports of board meetings or committee meetings
  5. Self-assessments of compliance with central bank oversight policy
  6. Bilateral contacts with the system and system participants
  7. Multilateral meetings (e.g., industry group meetings)
  8. On-site inspections
  9. Expert opinion from legal advisers and external auditors
  10. Information from other regulators
  11. Customer feedback

Regular Reporting

The BoU carries out daily monitoring of transaction volumes, values, and risk levels across payment systems.

Key Variables Monitored

  1. Volume of transactions
  2. Value of individual transactions
  3. Percentage of rejected transactions
  4. Percentage of queued transactions (e.g., UNISS and ACH)
  5. Use of intra-day liquidity facilities and difficulties in regularizing settlement accounts at end of day
  6. Use of collateral and collateral executions
  7. Bunching of transactions (late entries may indicate attempts to preserve liquidity)

Regular Meetings

The BoU holds regular meetings with senior representatives of payment systems providers/operators to discuss policy, regulatory developments, assessment, and monitoring issues.

Key Discussions

  • Policy updates and changes
  • Regulatory requirements and compliance
  • Assessment and monitoring findings
  • System performance and status

Assessment

Oversight is an ongoing task in a developing economy like Uganda’s. Monitoring provides information on whether policy objectives and standards are being met. Assessment represents a more extensive analysis and investigation of systems to ensure their performance and status align with best practice for safety and efficiency.

Key Objectives

  • Ensure the safe and efficient operation of payment systems.
  • Identify potential risks and vulnerabilities.
  • Monitor compliance with regulatory requirements.
  • Provide regular reporting and feedback to stakeholders.