Uganda Firms with High Capital Gains Suspected of Criminal Proceeds

A worrying trend has emerged in Uganda’s corporate sector, where some companies have been found to have unusually high capital gains compared to their length of operation. This has raised concerns that these firms may be using criminal proceeds at the time of incorporation.

Organized Crime Groups Misusing Legal Structures

According to sources, organized crime groups are misusing legal structures to hide beneficial ownership and conceal illegal activities. The lack of requirement for companies to maintain information on beneficial ownership has made it easy for criminals to use this loophole to their advantage.

Real Estate Companies a Major Vulnerability

Real estate companies have been identified as a major vulnerability in Uganda’s financial sector. Investigations have revealed that perpetrators of predicate offenses often invest in or acquire real estate properties, both for personal gain and to generate legitimate income.

National Risk Assessment Findings

The National Risk Assessment of 2017 found that real estate companies pose the highest money laundering (ML) threat in Uganda. Real estate companies are vulnerable to ML/TF due to:

• Inadequate client due diligence
• Poor understanding of ML/TF
• Complicit companies involved in selling and purchasing properties belonging to criminals

Examples of Misused Companies

Two cases highlight the need for greater transparency and accountability in Uganda’s corporate sector. The Office of the Director of Public Prosecutions (ODPP) is currently investigating these cases:

Case 1: SHAMMAH INVESTMENTS LTD

• A company was registered in the name of SHAMMAH INVESTMENTS LTD, with the accused person’s parents-in-law listed as joint shareholders.
• The company was later found to be a shell with no physical existence or business activity, and was only used to conceal the accused person’s ownership of acquired property.

Case 2: Western Cables Limited

• An accountant with Western Cables Limited embezzled funds during their employment and used a company to transfer the stolen money.
• The ODPP is investigating this case as part of its efforts to combat money laundering and terrorist financing.

Conclusion

These cases demonstrate the need for greater vigilance in identifying and preventing the misuse of companies by organized crime groups. The government must take action to address these vulnerabilities and ensure that Uganda’s corporate sector is not exploited for illegal activities.