Uganda’s quest to exit the international anti-money laundering grey list remains shrouded in uncertainty despite compliance actions undertaken this year.
The global Anti-Money Laundering/Combating of the Financing of Terrorism (AMF/CFT) grey list comprises countries with enforcement weaknesses and are subject to intense monitoring to upgrade their compliance ratings.
Prolonged compliance failure might lead to the blacklisting of a defaulting country in the international financial system; a step that is bound to disrupt the usage of electronic financial transfers, letters of credit, and movement of overseas financial remittances between the affected country and foreign commercial banks.
Implementation of AML/CFT compliance guidelines is overseen by the Financial Action Taskforce (FATF) based in Paris, France, and is anchored on the watchdog’s 40 guiding principles. Uganda was demoted to the FATF grey list in early 2020 following persistent failure to mitigate various loopholes in its AML/CFT enforcement regime.
Loopoles
Around 24 compliance loopholes were identified by FATF before the grey listing announcement was made shortly before the Covid-19 lockdown period. These included the absence of beneficial ownership disclosure rules for companies, business partnerships, and non-governmental organisations, failure to investigate and prosecute politically exposed persons (PEPs) engaged in money laundering, weaknesses detected in anti-terrorism financing regulations applied in the NGO sector and delays in conducting a fresh National Risk Assessment (NRA) for AML/CFT enforcement purposes.
While government officials say Uganda has written to FATF indicating full compliance with highlighted items, the latter has promised to send another inspection team to the country before the end of the year to verify official claims.
“We’ve addressed all the compliance loopholes highlighted in the 24 problem areas cited by FATF. We have also written to FATF about the latest progress on this matter and it has promised to send an onsite inspection team to verify our submissions before the end of this year,” said Moses Kaggwa, director for Economic Affairs at Uganda’s Finance Ministry.
Though FATF had issued threats of further punitive action against Uganda in case of continued non-compliance behaviour, significant improvements in the country’s remedial checklist seemingly saved the latter from the regulatory noose. Data compiled by the Bank of Uganda shows the country attained full compliance levels with 18 out of 24 identified problem areas by the close of June.
Controversial bill
But the impact of the latest hostile diplomatic relations with the US and European Union on Uganda’s efforts to exit the FATF greylist appears unclear. The passage of the controversial Anti-Homosexuality Act of 2023 by Uganda’s parliament earlier this year immediately sparked condemnation from the US and European Union.
This negative stance was followed by the World Bank’s suspension of new loan facilities sought by Uganda and exclusion from the African Growth and Opportunities Act (Agoa) with effect from January 2024.
“Disclosure of beneficial ownership information has become a global best practice, and we cannot run away from it anymore. There are some technical glitches in the Uganda Registration Services Bureau filing system in relation to beneficial ownership disclosure guidelines, but these will be overcome with time. The idea of AML/CFT noncompliance fines has been considered and might be sorted out later on,” observed Ian Mutibwa, managing partner at Signum Advocates.
Albania, Cayman Islands, Panama, and Jordan were removed from the FATF grey list in October while Bulgaria was added to this list during the same period. Besides Uganda, Nigeria, and South Africa remain stuck on the FATF greylist.
