Financial Crime World

Title: “Trade-Based Money Laundering in Uganda: A Joint Investigation by ACODE and Global Financial Integrity”

Date: July 19, 2023

International financial crime, particularly trade-based money laundering (TBML), poses a significant challenge for Uganda. In a new joint publication titled “Trade-Based Money Laundering in Uganda,” advocacy group Advocates Coalition for Development and Development (ACODE) and research organization Global Financial Integrity (GFI) explore the vulnerabilities of sectors prone to TBML and its impact on Uganda’s economy.

Susceptible Sectors

The report begins by detailing the sectors most susceptible to TBML:

  1. Import and export activities: The trade sector’s complexity and lack of transparency create opportunities for TBML.
  2. The extractive industry: Weak regulatory frameworks and ill-defined legal provisions make this sector a popular target for money launderers.
  3. Agriculture: This sector’s informality and lack of regulatory oversight contribute to its vulnerability.

acknowledging these weaknesses aims to increase awareness and understanding among key stakeholders, policymakers, and law enforcement agencies.

Government’s Efforts

Despite the challenges, the Ugandan government is commended for its ongoing efforts to address TBML. This commitment is demonstrated through various policies, legislation, and institutional frameworks:

  1. Implementation of legislation: The Anti-Money Laundering Act and the Proceeds of Crime and Anti-Money Laundering Act are essential in the fight against TBML.
  2. Institutional frameworks: Establishment of the Financial Intelligence Authority and Inter-Agency Task Team on Money Laundering.
  3. International cooperation: Uganda’s participation in the Egmont Group and other international organizations.

ACODE and GFI stress the importance of continued collaboration among government agencies, financial institutions, and civil society organizations to ensure a comprehensive and effective response.

Key Risk Factors

The publication identifies the following key risk factors driving TBML in Uganda:

  1. Corruption: Weak governance structures and lack of transparency allow corruption to flourish.
  2. Lack of coordination among stakeholders: A fragmented approach to addressing TBML hinders progress.
  3. Weak oversight in Free Trade Zones: Minimal regulations in these zones create openings for TBML.
  4. Minimal awareness of TBML: The lack of understanding among key players limits the ability to effectively combat this method of money laundering.

Recommendations

To combat these challenges, ACODE and GFI suggest the following recommendations:

  1. Awareness and training: Provide training on TBML for private and public actors.
  2. ** Implementing beneficial ownership laws:** Enforce legal frameworks requiring disclosure of beneficial ownership to limit anonymity for transactional activities.
  3. Increased collaboration and data sharing: Foster effective partnerships and data exchange among stakeholders.
  4. Support for frontline agencies: Provide additional resources and funding to agencies tasked with combating TBML.

Consequences of IFFs

The publication underscores the significant loss to Uganda’s economy due to illicit financial flows (IFFs). An estimated UGX.2 trillion is lost annually. TBML, a sophisticated method of money laundering, makes it particularly difficult for financial institutions and customs authorities to detect.

As an active participant in international trade, Uganda is at risk of experiencing the adverse effects of TBML, including economic instability and hindrances to sustainable development.

Gratitude and Collaboration

ACODE and GFI express their gratitude to all individuals, institutions, and government agencies that contributed to the research and insights presented in this publication. They believe the findings will serve as valuable resources for policymakers, practitioners, and stakeholders dedicated to combating TBML in Uganda.