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Money Laundering through Real Estate: Uganda’s Unregulated Sector Exposes Country to Illicit Funds

The real estate sector in Uganda is operating without a law, making it vulnerable to money laundering, according to experts. The lack of regulation has created an environment where illicit funds can easily be invested in property and land.

A Lack of Regulation

“There are no accountable persons registered with the Finance Intelligence Authority (FIA) in the real estate business,” says Shirley Kongai, President of the Association of Real Estate Agents in Uganda. “This has exposed the sector to hidden money obtained from money laundering.” Kongai notes that there are over 170 real estate companies and 300 individual real estate dealers registered, but many more operate without being registered.

Fraudulent Activities

The absence of a law regulating the real estate sector has led to fraudulent activities such as land grabbing and speculation in land prices. Kongai argues that when people pay large sums of money for land and property without bargaining, it encourages others in the neighborhood to hike their prices too, leading to inflation. “This will make accommodation expensive in the near future,” she warns.

The Need for Regulation

The Association of Real Estate Agents in Uganda is pushing for the sector to be regulated through a law known as the Real Estates Agency and Management Bill, which they presented to the Ministry of Lands and is still in its draft stages. Kongai hopes that when the bill is passed into law, it will reduce cases of people earning money through fraudulent ways and investing it in real estate.

A Risky Sector

According to a risk assessment report by FIA on money laundering and terrorist financing in 2017, real estate is one of the risky sectors that has encouraged money laundering due to its lack of regulation. “There is no law regulating the real estate business, which has exposed the sector to encourage illicit money in the country,” says Odo Manyire, Director for Operations and Analysis at FIA.

Cash-Based Economy and Porous Borders

Uganda’s cash-based economy and porous borders also contribute to the problem, making it challenging to track all money transactions. “You cannot track all land transactions because most of the land in Uganda is not registered, and the proceeds from land transactions are hard to track especially if this is bad money being invested in real estate,” Manyire explains.

Recommendations

Experts recommend adopting formal money transactions to reduce the cash economy and promote financial inclusion. FIA is drafting guidelines for compliance with the Anti-Money Laundering Act 2013 for the real estate sector, which will monitor the sector for compliance. “This will help track suspicious transactions and regulate the sector,” Manyire says.

Conclusion

The lack of regulation in Uganda’s real estate sector has exposed the country to money laundering and other fraudulent activities. It is essential that the government passes a law regulating the sector to reduce these risks and promote transparency in property transactions.