Parliament Passes Bills Against Money Laundering, Terror Financing

KAMPALA, UGANDA: Government has moved a step closer to meeting the requirements that would see the country given a nod of approval in fighting money laundering and terrorism financing.

This comes after parliament passed a raft of legislations this week including the Trustees Incorporation (Amendment) Bill, 2022; the Anti-Money Laundering (Amendment) Bill, 2022; the Anti-Money Laundering (Amendment) Bill, 2022 and the Cooperative Societies (Amendment) Bill, 2022.

Other Bills passed over the week are the Excise Duty (Amendment) Bill, 2022; the Insolvency (Amendment) Bill, 2022 and the Partnership (Amendment) Bill.

The Bills introduce new clauses that make some activities in transactions illegal, and also provide for penalties in form of imprisonment or financial penalties or both.

In 2016, the Mutual Evaluation Report (MER) of Uganda was adopted by the global monitoring body, the Financial Action Task Force (FATF) in 2016 and approved by the Council of Ministers in May 2016.

The report made several recommendations arising from the weaknesses that were revealed by the report, showing how Uganda’s level of compliance was very low.

In January 2022, the Executive Director of the Finance Intelligence Authority, Sydney Asubo revealed that Uganda was at risk of being blacklisted by FATF unless the government made certain legal and regulatory interventions against money laundering by May 2022.

“Uganda was placed on the grey list in 2020. It means the country has been identified but it made commitments with the FATF to address the specific issues within a given time frame,” he said.

When the country is on the grey list, it means financial transactions with other countries will be handled with more caution, encountering more scrutiny than those of other countries.This means slowing down and making the transaction between Uganda and other countries more expensive.

If the country is put on the blacklist, it is an advisory to other countries against transacting with Uganda because then, there would be no guarantees that money sent to Uganda or coming from Uganda is not going to fund illegal activities like terrorism, or coming from illicit sources.

Despite taking longer than required, according to the FIA, the pieces of legislation could help the country improve her rating which is currently dubbed “Partly Compliant”.

The Anti-Money Laundering (Amendment) Bill, 2022 gives powers to state authorities like the FIA to impose sanctions including a 30 million shilling fine on a person or organisation that violates the laws.

The law gives responsibility to persons who have the capacity and may come into contact with suspected illicit finances to detect and prevent such a transaction from happening. This may be in conjunction with the FIA.

The Cooperative Societies Amendment Bill, 2022 introduces clauses on ‘beneficial ownership’, where the Society is required to reveal who the real owners of the organisation are, if they are not the registered directors or owners.

The amendments in the Cooperative Societies Law were in response to the concerns about the unsatisfactory safeguards according to FATF.

Justice and Constitutional Affairs Minister, Norbert Mao said that Uganda needed to review the provisions on beneficial owners in various laws in order for its legal and regulatory framework on Anti-Money Laundering and Combating the Financing of Terrorism to be considered compliant with the FATF Recommendations.

The main objective of the Anti-Terrorism (Amendment) Bill, 2022 is to provide for the offence of proliferation financing and other related matters.

The Bill states that the offence of proliferation financing occurs “where the person or organisation, makes available an asset, provides a financial service or conducts a financial transaction, knowingly or recklessly, for activities related to terrorism, whether the activities occurred or not.

The activities referred to include the manufacture, production, possession, acquisition, stockpiling, storage, development, transportation, sale, supply, transfer, expo, transhipment and/or use of prohibited weapons, training, provision of technical advice among others.

Under the principle of ‘beneficial ownership’ is also the Trustees Incorporation (Amendment) Bill, 2022, which has been reviewed. According to the Ministry of Finance, the Bill’s objective is to widen the nature of Trustees required to register with the Minister for Lands, Housing and Urban Development and to define beneficial owners.

Real Estate has been mentioned as one of the targeted sectors were illicitly acquired money is ‘made to look clean’. The sector partly thrives on money that is either ill-gotten or is in transit to commit a crime.

The Trustees Incorporation Act regulates the incorporation of trustees of certain bodies and associations of persons in Uganda who may be appointed by anybody or association established for any religious, educational, social or charitable purpose.

“Trust” describes the relationship created when the property is transferred by one person (the “settlor’) to another person (the “trustee”) to hold that property for the benefit of specified persons or a class of persons (the “beneficiaries”).

Attorney General, Kiryowa Kiwanuka says that the 7 Bills deal with activities under the Financial Action Task Force.

He says that six years ago, Uganda was required to carry out 40 recommendations into its financial management system and its laws governing the management of anti-money laundering and countering of terrorism financing.

says Kiryowa: “One of the things that were required to do in those recommendations was to make amendments to the seven Bills to address three fundamental aspects. Beneficial ownership required to disclose in any entity, who the beneficial owners are, if any.

The second was proliferation financing, where tools, money, premises and other properties of persons are used to finance terrorism and then, obviously, anti-terrorism financing. The process of having the financial management systems in place was earlier interrupted by the Covid-19 pandemic, but it is dangerous if Uganda does not put in place the legislations.

“A black list will stop us from getting into the (global) financial space. Our euro transactions are done in several cities in Europe like Frankfurt, the pound transactions are done in London and the dollars in the US. The moment you are blacklisted then these places where you would be doing these foreign currency transactions are curtailed. And that will have very, very serious effects on our country.”

Speaking about the Anti-Terrorism (Amendment) Bill, 2022, Attorney General Kiryowa says that this is to specifically deal with recommendation 7 of FATF, which requires countries to implement targeted financial sanctions to comply with United Nations-UN Security Council resolution.

The UN resolution relates to the prevention, suppression and destruction of proliferation of weapons of mass destruction and its financing.

Parliament made two amendments to the Anti-Terrorism (Amendment) Bill, 2022 and one was a definition of proliferation financing, the offence and also incorporates the aspects of proliferation financing.

The Financial Action Task Force (FATF) defines proliferation financing as the act of providing funds or financial services which are used, for the manufacture, acquisition, possession, development, export, trans-shipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and their means of delivery and related materials in contravention of national laws or international obligations.

The law passed by parliament now provides for an offence of proliferation financing and any person or organization that contravenes the law, they are liable on conviction, to imprisonment not exceeding 20 years or a fine not exceeding 500,000 currency points (10 billion Shillings) or both.

Speaker of Parliament, Anita Among defended the expeditious approval of the Bills by the House, describing them as urgent as part of Uganda’s obligations in compliance with the international financial regulations under the Financial Action Task Force.

“Failure for Uganda to pass these Bills would mean a sanction on Ugandan and this will affect negatively the country as a whole,” said Among. “To ensure timely consideration of the Bills, a joint hearing by Committees to which these Bills were referred was called and the stakeholders gave in their inputs. So there shouldn’t be an issue of non-involvement of stakeholders.”

Under the Anti-Money Laundering (Amendment) Bill, 2022, government empowers the Financial Intelligence Authority and supervisory authorities to levy administrative penalties for breach of the provisions of the Act and related matters.

“The Committee noted that the assessment of Uganda’s anti-money laundering legal and regulatory regime lacked sanctions for natural or legal persons who fail to comply anti-money laundering requirements,” says Jane Pacuto, the Vice Chairperson of Parliament’ s Finance Committee.

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