A top official at the Bank of Uganda and stakeholders in the financial services industry are concerned about the delay in completing the enactment of the Anti-Money Laundering Act, which they say is exposing the country to many risks.
Money laundering is the process of concealing the source of large amounts of money - mainly gained through illegitimate means - and 'cleaning it" by putting it into the financial system. Over the last two decades, money laundering is a major global concern which international financial institutions and analysts say is a danger to the financial system of a country.
Countries worldwide have passed laws to curb the vice and Uganda is the only country in the East African region that has not yet started implementing such laws and has been under intense international pressure to pass it.
Since 2005, the Bill was in Parliament until it was passed on July 10. To date, however, it awaits assent from President Yoweri Museveni to become law.
Speaking during a workshop organized by Standard Chartered Bank on money laundering in Kampala on Aug. 15, officials were unhappy about the delay in passing the law which they said is critical in handling money launderers. Justine Bagyenda, the executive director for supervision at Bank of Uganda (BoU) was particularly concerned saying Uganda does not need such 'dirty money' because it is dangerous.
Bagyenda said money laundering means personal enrichment by a few, to the detriment of many and that it siphons off resources from public services and strangles public sector investment and growth. "We also know that it is the poor who suffer the most as a result," she added.
According to the Uganda's Act, persons involved in the activity or transactions would be liable to imprisonment for a period not exceeding 15 years or a fine not exceeding sh2billion or both punishments.
Bagyenda said that money laundering, if not prevented could undermine the integrity of financial institutions and thus public confidence in these institutions. It can also undermine financial stability and cause highly destabilising financial flows across borders.
She said the money laundered could also be used to corrupt public officials and the staff of financial institutions and "hence the fight against money laundering is also the fight against corruption."
Money laundering is also a concern because in other countries it has been used to support terrorist activities, because these activities require money which must be moved in a secret manner.
The legislation, which Uganda is yet to implement, is based on international standards set by the Financial Action Task Force on Money Laundering (FATF) - an inter-governmental body established in 1989 to set standards and promote the implementation of legislative and other measures to combat money laundering.
Uganda has been faulted many times for failing to pass the law, which has created an avenue for money launders to use it for their selfish motives. For instance, a 2012 report by the Center on Global Counterterrorism Cooperation in the United States notes that Uganda is "deeply vulnerable to money laundering and terrorist financing" and that "money laundering is rampant in the country."
Government officials particularly in the Ministry of Finance and Bank of Uganda agree with this assessment, a reason why they want the AML law implemented immediately.
The report says the vice in Uganda derives largely from government corruption, misappropriation of public funds and foreign assistance, and abuse of the public procurement process. Other widespread offenses for the vice are arms and natural resource smuggling, exchange control violations, and human trafficking.
Last month, Gen. Kale Kayihura, the Police boss, appeared to amplify the severity of the problem when he told an international policing conference that more than Shs 1 billion was recently stolen from the Vatican in Italy and deposited on bank accounts in Uganda.
Over the years, top Ugandan government officials have been notorious for wiring ill-gotten public money in the opposite direction for safe custody in European banks. Also, some investors are said to be repatriating their multi-million dollar profits abroad without going through the official channels. Looked at from that context, it is easy to know why the law has remained pending for almost a decade.
But at the workshop, financial industry stakeholders said Uganda's inability to monitor formal and informal financial transactions, particularly along borders with Sudan, Kenya, Tanzania, and the DR Congo, render the country extremely vulnerable to more advanced money laundering activities and potential terrorist financing.
Herman Kasekende, the Standard Chartered Bank managing director, said they organized the workshop because the passing and implementation of the law has been highly anticipated for a long time.
The workshop which was attended by bankers, police, central bank officials, members of Parliament aimed at sharing broad knowledge about money laundering and how the bodies can support its implementation.
"We need to be prepared for the law so that we handle all cases related to the vice," he said, adding "as Standard Chartered Bank we have been on top of this and will not stop. Everyone knows there is drug trafficking around town, embezzlement of public funds, and funding dangerous missions like terrorism among others."
When passed, banks will be compelled to report all suspicious transactions to relevant authorities. Failure to do so could lead to sanctions to the bank and the money launderer.
Nishanth Nottath, the regional head of financial crime intelligence operations for the Middle East, UAE, Pakistan and Africa at Standard Chartered Bank, and Alex Mwangi, manager for advisory-forensic at KPMG, an international audit firm, said it is a must for banks, government and other authorities to cooperate in fighting money laundering.
"If they (banks) hide these transactions and authorities get them, the story will be different on their side," Nottath said. He urged banks to invest in first class technology that can enable them detect suspicious transactions.
Nottach said having the other EAC countries already implementing the law like Tanzania, Kenya and Rwanda, leaves at a lot of questions to Uganda as to why they are dilly-dallying to pass the law.
"You wouldn't want your counterparts to leave you behind," Mwangi said, adding that Uganda needs to borrow a leaf from their Tanzanian counterparts who have made it very difficult to engage in the vice.
Winnie Kiiza, the Kasese Woman MP, caused some discomfort when she accused some unnamed financial institutions of being accomplices in the vice. She said the Bill had delayed because some banks were blocking it.
Going forward, Bagyenda said the priority now is to harness what BoU can do and what the banking industry players can do directly to deter money launders and to make them more catchable and punishable.