Financial Crime World

Uganda’s Financial Crimes Risk Assessment: Focus on Legal Persons and Arrangements

Introduction

Uganda, in its continuous endeavor to combat financial crimes such as money laundering and terrorist financing, conducted a risk assessment report focusing on legal persons and arrangements. This report aims to provide a comprehensive understanding of the threats, vulnerabilities, and methods used to facilitate financial crimes through legal entities in Uganda.

Methodology

The methodology used in this risk assessment incorporated qualitative and quantitative information, as well as expert opinions, to evaluate the ML/TF risks associated with various legal structures in Uganda. Data was collated from open and classified information sources including intelligence and security agencies, government ministries, departments, media, and publications.

  • Legal persons: Entities other than natural persons that can establish a relationship with a financial institution.
  • Legal arrangements: Express trusts and other similar legal structures.

The legal framework for these entities is based on various laws, including:

  • Companies Act
  • Partnership Act
  • Trustees Incorporation Act

Companies

  • Companies limited by shares
  • Companies limited by guarantee
  • Public companies

Use of Legitimate Corporations

Criminals may use legitimate corporations for money laundering or to hide their identities, often investing in them, financing their operations, and enjoying the returns on investment.

Methods Used to Facilitate ML/TF

Criminals utilize various methods to facilitate ML/TF through legal persons and arrangements:

  1. Use of legitimate corporations as fronts to obscure beneficial ownership
  2. Use of real estate companies to launder proceeds of crime
  3. Use of shell companies to hide proceeds of crime
  4. Concealing illicit proceeds with legitimate business activities

Real Estate Companies

Real estate companies pose the highest ML risk due to their value, potential for returns, and relatively low expertise requirements. ML/TF often results in proceeds being invested or acquired through real estate. Moreover, real estate companies may lack adequate client due diligence, have a poor understanding of ML/TF, or experience compliance from companies involved in selling and purchasing property belonging to criminals.

Conclusion

This risk assessment provides essential insights into the threats, vulnerabilities, and methods used to facilitate ML/TF through legal persons and arrangements in Uganda. The findings of this assessment will be crucial in informing policy interventions, resource allocation, and risk assessments for the industry. Future efforts should focus on addressing the identified weaknesses and enhancing transparency and beneficial ownership information to mitigate the risks associated with financial crimes.

[1] The U.S. National Money Laundering Strategy, July 2002, Chapter 1. Introduction [2] Glossary to the FATF Recommendations, 2012. [3] Ibid. Chapter 3. Legal Persons and Arrangements [4] Uganda v Valentino Kamya & 3 others, HCT 00-AC-SC 006/2016 [5] Ibid.