Unpicking the ‘art’ of washing dirty money

In its simplest forms, money laundering involves concealing, disguising, converting, transferring or removing criminal property.

The common thread is dirty money that—true to the ‘proceeds of crime’ descriptor—traces its roots to corruption, bribery, theft, drug dealing, tax evasion or even a chaotic mix of all.

Money launderers dedicate themselves to washing—both literally and metaphorically—dirty money. Their goal, widely ambitious in its scope and reach, is to make the money appear to come from a clean source.

The offence carries a maximum prison term of 15 years in Uganda. The main legislation governing money laundering is the Anti-Money Laundering Act 2013. As well as that sentence of “imprisonment for a period not exceeding 15 years” earmarked for complex schemes, there is also the option of “a fine not exceeding one hundred thousand currency points or both.”

The methods employed in money laundering involve a great deal of sophistication and complexity. This makes it a cold business, no matter who manages it. Injecting illicitly obtained cash into the legitimate financial system whilst disguising its origins takes on a convoluted nature.

Since universal banking has made money traceable, money launderers gravitate toward businesses that the taxman cannot quite understand the number of customers as well as quantity and value of what was sold.

 Businesses like casinos (as seen in the TV series Ozark), nail salons (in Breaking Bad), bakeries, restaurants and nightclubs have particularly proven to be popular.

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Revenues from crime are then conflated with genuine income from a given business.

In the recent past, the amount of cash that money launderers hold in offshore accounts has increased exponentially. Shell companies and unregistered trusts in tax havens have allowed laundering business to lap offshore. The TV series McMafia told the gripping account of such modern-day mobsters.

The reel world often mirrors the real world, and—in this case—at quite some cost. A 2022 report (Corporate Transparency: A Guide for Beneficial Ownership Laws in Uganda) co-authored by Global Financial Integrity (GFI) and Advocates Coalition for Development and Environment (Acode) estimates that Uganda annually loses Shs2 trillion ($550m) in illicit financial flows such as “corruption, money laundering, organised crime, trade misinvoicing, and tax evasion.”

The report grimly adds that this “translates into missed development opportunities, lost livelihoods and increased poverty” for Ugandan citizens.

Elsewhere, the Anti-Money Laundering Act 2013 continues to arouse fears and fascination in the same way. In 2013, the government was compelled to predispose itself to anti-money laundering legislation. This came after the Financial Action Task Force (FATF) unpicked the failure of government’s key anti-corruption pillars.

 The FATF made it abundantly clear that un-policed and often unenforceable anti-corruption laws risked turning Uganda into an international pariah.

The fears that in allocating more urgency and resources to defeat money launderers, critics of the government could be caught in the crosshairs crystallised in December of 2020.

 With the anti-money laundering legislation in place, the government law enforcement bodies moved to freeze bank accounts of a string of non-governmental organisations (NGOs).

While the government insisted that there were reasonable grounds to suspect that money in accounts of the said NGOs was either obtained illicitly or intended for unlawful use, the affected parties described the claims as spurious. Observers say this is an alarming testament to the way the piece of legislation can be used to stigmatise civic groups.

High Court Judge Musa Ssekaana recently described the indefinite suspension that the government slapped on one of the 54 NGOs as “irregular.”

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In a terse statement, Chapter Four said it was “look[ing] forward to engag[e] the National Bureau for Non-Governmental Organisations after Justice Ssekaana asked the appendage of the Internal Affairs ministry to “approach the decision making process with an open mind.”

Policing money laundering

The Anti-Money Laundering (AML) Act was passed in 2013, with the intelligence unit asked to enforce it established a year later. The maiden money laundering conviction in Uganda was in the 2015 case of Uganda versus Serwamba David Musoke and 6 others. Before the AML Act’s inception in 2013, the offence of money laundering was not criminalised under Ugandan law. The AML Act pronounces itself on money laundering as thus:

Who is a money launderer?

 lA person who converts, transfers, transports and transmits property knowingly or having reasons to believe that such property to be proceeds of crime, for purposes of concealing or disguising the illicit origin of the property or assisting any other person who is involved in the commission of the crime generating the proceeds to evade the legal consequences of his/her actions;

 l A person who conceals, disguises or impedes the establishment of the true nature, source, location, disposition, movement or ownership of or its rights with respect to property knowing or having reasons to believe such property to be proceeds of a crime, commits an offence;

A person who acquires, possesses, uses or administers property knowing or having reason to believe at the time of receipt that the property is the proceeds of crime commits an offence;

A person who acts to avoid a transaction reporting requirements provided in Part III of this Act commits an offence;

A person who assists another person to benefit from known proceeds of crime commits an offence;

A person who uses known proceeds of crime to facilitate the commission of a crime commits an offence;

A person who participates in, associates with, conspires to commit, attempts to commit, aid and abate or facilitate and counsel the commission of any of the acts described in sections (a) to (f) above commits an offence.

Suspicious transactions

Transactions made on behalf of a person whose identity has not been established to the satisfaction of the officer or employee performing the transaction;

Business relations and transactions with persons in jurisdictions that do not have adequate systems in place to prevent or deter money laundering or the financing of terrorism;

Electronic funds transfers, other than electronic funds transfer referred to in subsections 13(2) and (3) that do not contain complete originator information.

Penalties

A natural person who commits any offence is liable on conviction to imprisonment for a period not exceeding 15 years or a fine not exceeding one hundred thousand currency points or both;

A legal person that commits any offence is liable on conviction to a fine not exceeding two hundred thousand currency points;

An offence mentioned in sections 115 to 133 is punishable—if committed by a natural person—by imprisonment for a period not exceeding 5 years or a fine not exceeding thirty three thousand currency points, or both;

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An offence mentioned in sections 115 to 133 is punishable—if committed by a legal person such as a corporation—by a fine not exceeding seventy thousand currency points;

An offence mentioned in sections 115 to 133 is punishable—if a continuing offence—by a fine not exceeding five thousand currency points for each day on which the offence continues;

An offence mentioned in sections 115 to 133 is punishable—if no specific penalty is provided—by a fine not exceeding nine thousand currency points and in case of a continuing offence, to an additional fine not exceeding five thousand currency points for each day on which the offence continues.

Source: Anti-Money Laundering Act 2013