Financial Crime World

Uganda Confronts $550 Million Annual Losses due to Illicit Financial Flows

Ugandan economy is facing a significant loss of UGX 2 trillion annually due to the lack of transparency in business dealings, according to a joint report by Global Financial Integrity (GFI) and Advocates Coalition for Development and Environment (ACODE).

The Problem of Corporate Opacity

  • The report highlights the need for Ugandan government to require companies to disclose beneficial ownership information.
  • This involves revealing the identity of individuals who ultimately enjoy the benefits of an entity.

The Consequences of Anonymous Companies

“The ability to use anonymous companies enables criminals to conduct illegal activities such as tax evasion, corruption, money laundering and financing of terrorism while staying out of view of law enforcement authorities,” said Kaisa de Bel, Policy Analyst at GFI.

Case Examples

  • Ugandan and other African government officials have used shell companies and offshore trusts to stash and hide their wealth.
  • Uganda’s procurement body, the Public Procurement and Disposal of Public Assets Authority (PPDA), has directed contractors bidding for government tenders to reveal the real owners.

Experts’ Recommendations

Experts say that this is not sufficient to curb corruption which is the main source of Illicit Financial Flows. They recommend adopting a centralized register for all companies operating in Uganda to ensure transparency and accountability.

“A centralized Beneficial Ownership makes it easier for authorities to investigate and prevent the use of anonymous companies to hide proceeds of crime,” said Onesmus Mugyenyi, Deputy Director at ACODE.

Key Recommendations

  • Beneficial ownership legislation should cover all legal entities, including limited liability companies (LLCs), limited liability partnerships (LLPs), trusts and multinational companies operating in Uganda.
  • Collecting ID information will accurately identify the real individuals behind companies in Uganda, reducing procurement risks and corruption and ultimately curbing illicit financial flows.

Advocating for Change

GFI and ACODE advocate for the adoption of streamlined procedures and stringent beneficial ownership legislation in Uganda that prevents loopholes for financial criminals to exploit.