Money Laundering Detection Methods in Uganda Exposed: Report Reveals Sophisticated Trade-Based Money Laundering Scheme
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A new report has shed light on the increasing menace of trade-based money laundering (TBML) in Uganda, with experts warning that it has emerged as one of the most sophisticated methods used by criminal organisations and terrorist financiers to move money.
What is TBML?
According to a policy memo jointly published by Advocates Coalition for Development and Environment (ACODE) and Global Financial Integrity (GFI), TBML involves giving false information on imports and exports through:
- Over/under-billing
- Multiple billing
- Over/under shipping
- Quality misrepresentation
This method of money laundering is based on fraudulent trade transactions and their financing, making it easy to thrive due to the scale, complexity, and speed of global trade.
Definition by FATF
The Financial Action Task Force (FATF) defines TBML as a process of concealing the proceeds of crime and moving value through the use of trade transactions to legitimise their illicit origins. The report highlights that policy makers struggle to understand TBML, often confusing it with trade-related offences such as fraud and smuggling.
Convergence with Other Crimes
TBML has been recognized as one of the three main methods used by criminal organisations and terrorist financiers to move money while disguising its origins and integrating it back into the formal economy. The authors of the report found that this method often converges with other types of crime, such as:
- Corruption
- Illicit trade
- Drug trafficking
- Human trafficking
- Terrorism financing
- Other illegal activities
Economic Impact
The report reveals that TBML deprives the government of much-needed tax income, which limits the amount of money it can spend on service deliveries like:
- Security
- Administration of justice
- Social programs and development
This has compelled the government to finance its budget through both domestic and foreign borrowing, with Uganda’s debt burden standing at 51.9 per cent of GDP.
Vulnerable Products
Gold and petroleum products are listed as being particularly vulnerable to TBML, either as exports or imports. The report notes that trade mis-invoicing (TM), a form of TBML, is considered a major cause of revenue loss to the country, with GFI estimating the total value gap as $6.6 billion (24 trillion) in trade from Uganda between 2006 and 2015.
Key Institutions
The report identifies key institutions including:
- Financial Intelligence Authority (FIA)
- Criminal Investigations Department (CID)
- Uganda Revenue Authority (URA)
that exist to help counter TBML.
Recommendations
The authors recommend that policy makers adopt a comprehensive approach to addressing the issue, including:
- Strengthening legal frameworks
- Increasing penalties for those found guilty of making false or misleading statements
Existing Legislation
The Parliament of Uganda has already passed key legislation aimed at addressing existing gaps in the law on beneficial ownership information and empowering the FIA and other supervisory authorities to levy administrative penalties for breach of the provisions of the Act.