Navigating Uganda’s Know-Your-Customer Landscape: A Crucial Step Towards Expanding Digital Financial Services

By: Jeremiah Grossman

Importance of KYC Regulations in Uganda’s DFS Ecosystem

The digital financial services (DFS) landscape in Uganda is expanding, but ensuring compliance with Know-Your-Customer (KYC) regulations is crucial for growth. As DFS adopts various end-users and use cases, understanding and adhering to KYC requirements is vital for maintaining a well-regulated environment that fosters adoption and scalability.

Complex KYC Regulations in Uganda

Navigating the intricate web of laws and regulations governing KYC requirements in Uganda involves several pieces of legislation:

• Financial Institutions Act, 2004 (FI Act, 2004)
• Financial Institutions (Anti-Money Laundering) Regulations, 2010 (FI [AML] Regulations, 2010)
• Mobile Money Guidelines, 2013 (MM Guidelines, 2013)
• Anti-Money Laundering Act, 2013 (AML Act, 2013)
• Anti-Money Laundering Regulations, 2015 (AML Regulations, 2015)
• Registration of Persons Act, 2015 (ROPA, 2015)
• Anti-Money Laundering (Amendment) Act, 2017 (AML [Amendment] Act, 2017)
• Financial Institutions (Agent Banking) Regulations (forthcoming)

Although these regulations generally do not conflict, inconsistencies might arise between the FI [AML] Regulations, 2010, and the AML Regulations, 2015. In such cases, financial service providers should follow the AML Regulations, 2015, as prescribed by the Bank of Uganda.

Addressing KYC Challenges: An Initiative by UNCDF

The United Nations Capital Development Fund (UNCDF) acknowledged the importance of addressing challenges surrounding the KYC regime to create a well-regulated environment for digital financial services in Uganda. Through their objective of building an inclusive DFS sector, UNCDF conducted research on the following KYC-related issues:

1. Registration and onboarding difficulties for merchants and refugees due to stringent KYC requirements and processes
2. Discrepancies in interpretation of requirements in the KYC regime
3. Best practices from other DFS markets that can provide solutions and insights to address challenges and opportunities surrounding the KYC regime in Uganda
4. Detailed analysis and evaluation of various KYC requirements and associated processes for banks, mobile network operators, agents, mobile money merchants, and other entities

Onboarding Requirements for DFS Stakeholders

This article delves into the specific onboarding requirements for various DFS stakeholders, focusing on the challenges within the complex KYC landscape in Uganda’s DFS ecosystem:

Individual Bank Accounts

Requirements:

• Proof of identity: National ID, passport, or driver’s license
• Proof of address: Utility bills, lease agreement, or bank statement
• Registration with the Ugandan Revenue Authority

Challenges:

• Inadequate infrastructure for verification
• Long turnaround times for KYC process

Individual Mobile Money Accounts

Requirements:

• Proof of identity: National ID or Passport
• Proof of address: Utility bills or lease agreement

Challenges:

• Limited identity verification methods
• Difficulty in establishing residency for refugees

Banking and Mobile Money Agents

Requirements:

• Identity verification for agent and principal
• Business registration and location

Challenges:

• Complex application processes
• Difficulty verifying agents in remote locations

Mobile Money Merchants

Requirements:

• Identity verification
• Business registration and location
• Compliance with operating procedures

Challenges:

• Limited identity verification methods
• Difficulty establishing merchant locations

Other Entities

Requirements:

• Identity verification for all individuals involved in the entity
• Registration of the entity and its business operations

Challenges:

• Complex registration procedures
• Difficulty verifying entities in remote locations