In the fight against illicit financial flows and money laundering, the Financial Intelligence Authority (FIA) has identified a critical obstacle – the lack of industry knowledge among key stakeholders. Uganda, in its efforts to meet international standards, has made regulatory adjustments since being placed on the ‘grey list’ of the Financial Action Task Force (FATF), a global initiative targeting money laundering.
Fiona Nabagala, the FIA Manager for Training and Outreach in the Anti Money Laundering Unit, emphasized that Uganda still faces significant challenges in securing its financial system. One key issue is the limited awareness among the main actors within the industry regarding their roles in either contributing to or fighting against illicit financial activities.
Nabagala expressed her concerns during a meeting that took place between Members of Parliament, trade and tax information non-governmental organizations (NGOs). The meeting’s theme revolved around the connection between illicit financial flows and domestic revenue mobilization.
One of the notable issues highlighted by Nabagala is the existing gaps in the legal framework, even with the enactment of various acts like the Anti-money Laundering (Amendment) Act, the Companies (Amendment) Act, 2022; The Partnership (Amendment), 2022; The Trustees Incorporation (Amendment) Act, 2022; The Anti-Money Laundering Act, The Cooperative Societies (Amendment) Act, 2022, and The Anti-Terrorism (Amendment) Bill, 2022. Notably, these laws do not provide for the confiscation of property acquired from illicit funds, and they impose uniform penalties regardless of the size or scale of the offending company.
The meeting was organized by the Southern and Eastern Africa Tax Information Network (SEATINI), the Tax Justice Network Africa, and the Uganda Parliamentary Network of Illicit Financial Flows and tax justice. Additionally, the Uganda Revenue Authority (URA) has been actively compiling and prosecuting cases related to money laundering.
Nicholas Muganga, a URA legal officer, revealed that most culprits involved in money laundering cases come from various African countries, especially West Africa, the Horn of Africa, and China. The URA has been collaborating with security agencies to enhance their capacity to investigate and prosecute cases related to illicit financial flows.
Dr. Ibrahim Mukisa, a Senior Lecturer at the Makerere School of Economics, emphasized that the fight against illicit financial flows is an ongoing and ever-evolving process. He underlined the need for continuous updates and improvements, given the complex nature of the illicit financial industry, which has been further complicated by digital technology.
The illicit financial flows industry encompasses a range of actions, including smuggling, human trafficking, wildlife trafficking, and financing terrorism. These activities thrive when regulatory frameworks are weak or absent. Dr. Mukisa provided an example of how Double Taxation Agreements, intended to prevent double taxation for investors in two countries, have been abused by richer parties, enabling them to avoid paying taxes. Notably, Uganda’s agreements with the Netherlands and Mauritius have allowed investors from these countries to pay minimal or no taxes.
Gerald Namoma, a Senior Economist at the Ministry of Finance, Planning, and Economic Development, reported that negotiations to amend these agreements are in progress to promote fairness and equity between Uganda and its treaty partners, although negotiations with Amsterdam have been particularly challenging.
The event aimed to enhance the knowledge of Members of Parliament regarding illicit financial flows, fair taxation, and related legislative frameworks. It sought to empower lawmakers for effective policy interventions, create a roadmap to address the issue, and offer policy proposals for the African Parliamentary Network’s upcoming meeting.
Herbert Kafeero, the Communications Head at SEATINI Uganda, acknowledged Uganda’s efforts to combat illicit financial flows through commitments, legal enactments, and institution strengthening. However, he noted the persistent knowledge gap among stakeholders in understanding illicit financial flows, their impact, and the role that civil society organizations and media can play in advancing the discussion.
The United Nations estimates that Africa loses $88.6 billion annually to illicit financial flows, a figure exceeding the combined amounts received in official development assistance and foreign direct investment. This represents nearly half of the financing required to achieve the Sustainable Development Goals (SDGs).