Enhancing Beneficial Ownership Transparency in Uganda: A Key Step in Combating Money Laundering and Tax Avoidance

Introduction

As the global community continues to grapple with the issue of money laundering and tax avoidance, Uganda is being urged to enhance its beneficial ownership transparency. This transparency is crucial in combating illicit financial flows and ensuring that companies operating within the country are transparent and accountable.

The Need for Beneficial Ownership Transparency

According to a report by the Stolen Asset Recovery Initiative by World Bank, anonymous companies were used in majority of the corruption cases reviewed. This highlights the need for governments to ensure that they have accurate information on who owns and controls companies operating within their jurisdictions.

Challenges Facing Uganda’s Beneficial Ownership Transparency Efforts

Uganda’s journey towards enhancing beneficial ownership transparency started in 2012, with the introduction of the Companies Act amendment. However, despite several amendments made since then, challenges remain:

• Lack of clarity on what constitutes a beneficial owner: Different laws define it differently, leading to calls for the government to clarify the definition.
• Disparity across laws: For instance, while the Income Tax Act defines a beneficial owner as someone who controls a customer or the natural person on whose behalf a transaction is conducted, the Mining and Minerals Act requires companies to disclose their beneficial ownership data in a publicly available database if they have a 5 percent shareholding.

Recommendations for Enhancing Beneficial Ownership Transparency

To address these challenges, several recommendations are proposed:

• Clarify the definition of beneficial ownership: Ensure consistency across all laws.
• Establish a public registry for companies operating in extractives: Require accountable persons such as lawyers and accountants to collect beneficial owner data. Failure to comply with these requirements should be penalized accordingly.
• Introduce legislation similar to Kenya and Ghana’s beneficial ownership legislation: This will help to ensure that companies operating within Uganda are transparent and accountable.

Conclusion

As Uganda continues to grapple with the issue of beneficial ownership transparency, it is clear that more needs to be done to ensure that companies operating within its jurisdiction are transparent and accountable. The government must take concrete steps to address the disparities in the definition of beneficial owner and establish a public registry for companies operating in extractives.