10 January 2013

Uganda: War On Money Laundering, Drugs to Intensify

Barely a month after the death of MP Cerinah Nebanda due to a drug overdose, a prosecution manual on illicit trade will be launched at the end of this month to nip the growing industry in the bud locally.

"The existence of various laws to curb the vice has not done much to stop illicit trade in Uganda. What remains to be done then is the establishment of a strict and comprehensive system of edging out the vice in the economy," according to the manual's introductory remarks.

Among the things that come under illicit trade are smuggling, human trafficking and narcotics trade, money laundering and counterfeiting and trading in endangered species.

The new manual being launched by the office of the Director of Public Prosecution (DPP) with support from the private sector, the Uganda Revenue Authority (URA) and Uganda National Bureau of Standards (UNBS).

"This manual highlights the prosecution process and important criminal law principals that the prosecutor should be aware of to successfully prosecute offences related to illicit trade," is the stated manual's main purpose.

The negative implications of illicit trade include the loss of taxes, pushes away legitimate investment, unemployment, discourage innovation, exacerbates insecurity and health risks.

No real figures have been revealed as to the cost of illicit trade to the economy, but authorities believe it is substantial going into billions of shillings in lost revenues alone.

Clamping down on illicit trade in whatever form it presents itself is critical because the same networks used to smuggle will be used in human trafficking or drug trade or money laundering or perpetuation of terrorism. And if allowed to take root, no one is immune from its nefarious influence.

Take the hypothetical situation of the public official who has just hit a "deal" of a few hundred millions of shillings. His challenge is how does he "clean" the money without any evidence of how he got his ill-gotten wealth.

Nowadays if he buys property worth more than sh50m he has to declare his income to URA. Not wanting to disclose his income, he will either try to corrupt a URA official to look the other way or register the property in someone else's names.

The corrupt revenue official is part of an existing network and our public official has joined it. With that out of the way, the official may embark on developing his land and he may soon be put in touch with dealers of 'cheaper' than market price cement. Cement, which either has not been taxed or is counterfeit.

If he decides to rent out the property he may price it at market rates that are already probably inflated by 'hot' money.

The numerous properties that remain vacant for months on end are probably testament to this hot money, which requires no return.

This ill-gotten wealth distorts the property market, making it too expensive for honest investors to get in. But as these same officials amass this wealth, the urge to protect their wealth and themselves from prosecution forces them to go into politics or try to pay off the system to do their bidding. And if it gets so bad, these networks can take over whole states and force them to do their bidding.

Moses Naim, in his book, Illicit says: "States do not go into crime; criminals take over or even set up states." In central Asia, the breakaway republic of Transdniester Moldovan Republic is one such example.

It broke away from the former Soviet republic of Moldova in 1990 and was for a long time run as a father-son affair - the president Igor Smirnov and the son Vladmir was the head of customs.

The country is not recognised by any country but is internationally recognised as a hub of the weapons trade. "Weapons are to Transdniester what chocolate is to Switzerland or oil to Saudi Arabia. Transdniester export weapons - illegally," Naim wrote.

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