Uganda’s Financial Institutions Urged to Step Up Money Laundering Detection Methods
In an effort to strengthen its financial institutions, Uganda has implemented various measures to prevent money laundering and terrorist financing. As part of these efforts, banks in the country are being urged to adopt robust methods for detecting money laundering.
Key Area of Focus: Customer Acquisition Process
According to experts, one key area of focus is the customer acquisition process, which requires strict adherence to applicable laws and regulations. This includes Know Your Customer (KYC) practices, which involve verifying the identity of customers during onboarding and continuously throughout their relationship with the bank.
Regulatory Framework
The Financial Institutions Act, enacted in 2004, governs the licensing, operational requirements, and regulation of banks and financial institutions in Uganda. The law defines “financial institution business” as activities conducted within the country’s banking sector, including:
- Accepting deposits
- Lending
- Foreign exchange services
- Money transmission
- Securities trading
The Bank of Uganda (BOU) is responsible for supervising and regulating these financial institutions, ensuring compliance with the law.
Anti-Money Laundering Act and Financial Intelligence Authority
The Anti-Money Laundering Act (AMLA) criminalises the process of disguising illegally obtained property as legitimate and involves concealing its nature, source, location, disposition, or movement. AMLA also establishes the Financial Intelligence Authority (FIA), which is responsible for:
- Identifying proceeds of crime
- Combating money laundering
- Ensuring compliance
Requirements for Banks in Uganda
To comply with AMLA requirements, banks in Uganda must:
- Register with the FIA as an accountable person
- Verify customer identities at onboarding and continuously throughout their relationship
- Conduct risk assessments to detect and monitor money laundering or terrorism financing
- Maintain records on customer identification and account files
- Report cash and monetary transactions exceeding UGX 20 million
Reliance on External Services
In addition to these requirements, banks are also advised to rely on external services to apply due diligence measures. However, regulations state that even if a bank relies on an external service provider, it remains responsible for ensuring the accuracy of the information provided.
Innovative Solutions
To ease compliance burdens and stay ahead of the curve, banks in Uganda can adopt innovative solutions such as Smile ID’s KYC and AML offerings. These solutions combine automated KYC and AML checks to meet the Bank of Uganda requirements on a single platform.
Benefits of Improved Compliance
By adopting these measures, banks in Uganda can:
- Improve their risk management capabilities
- Contribute significantly to the sector’s growth and stability