Company Laws in Uganda: A Key Role in Combating Money Laundering
In an effort to combat money laundering and terrorist financing, the Uganda Registration Services Bureau (URSB) has outlined strict regulations governing companies in Uganda. With over 325,000 active companies as of March 2021, it is essential that these regulations are enforced to prevent illegal activities.
Public and Private Companies
The URSB defines public companies as those with limited liability, a minimum of two members, and no limitation on the maximum number of members. These companies are allowed to invite the public to subscribe for shares or debentures. On the other hand, private companies, also known as limited companies by guarantee, have limited liability and a minimum of seven members.
Foreign Companies Operating in Uganda
Foreign companies that establish a place of business in Uganda are required to provide certified copies of their certificate of incorporation, memorandum, and articles/charter or constitution from their country of origin. These documents must be submitted before a certificate of registration is issued.
Money Laundering Concerns
The use of legitimate corporations by criminals to launder money is another concern. Criminals may invest in legitimate companies with the motive of earning a return on their criminal proceeds or to mask their identities. In some cases, companies have been found to have high capital gains compared to the length of time they were owned, indicating the use of criminal proceeds at the time of incorporation.
Other methods used to facilitate money laundering and terrorist financing include:
- Using real estate companies
- Shell companies
- Concealing illicit proceeds with legitimate business activities
Real Estate Companies
Real estate companies pose a high risk due to inadequate client due diligence, poor understanding of money laundering and terrorist financing, and complicit companies involved in the selling and purchasing of property belonging to criminals.
Shell Companies
The use of shell companies is another concern. Shell companies are legal persons that have no significant operations or related assets but are used to conceal beneficial owners and proceeds. In some cases, companies have been found to be registered solely for the purpose of hiding illicit funds.
Recent Cases
A recent case, Uganda vs. Kamya Valentino, highlights the misuse of a company in money laundering activities. An accused person had incorporated a company, Shammah Investments Ltd., which was used to layer suspected crime proceeds in the money laundering cycle.
Other examples include:
- Uganda vs. XY & 2 Others: an accountant used her employment as cover for money laundering activities
- Shell companies registered with no physical existence or business activity but were used to conceal ownership of acquired property
The Role of URSB and ODPP
The Office of the Director of Public Prosecutions (ODPP) is currently guiding investigations in several cases involving the misuse of companies for criminal activities. The URSB has a crucial role to play in preventing and detecting money laundering and terrorist financing by ensuring that companies operating in Uganda are transparent and comply with relevant regulations.