Why Uganda is attractive to tainted foreign money

The names that one 2018 charge sheet has are so-called small fish—Jonathan Tindyebwa, Ssalongo Abdu Lubowa alias Abraham Mukiibi, Allan Sabiiti, Patrick Mugisha, Ronald Kato Kavuma and Martin Sabiiti.

 The sextet are accused of fraudulently obtaining Shs1.2b from Dauda Katende, well aware that the money was—in money laundering speak—proceeds of crime.

It’s said the sextet used the money to acquire property ranging from cars (Toyota Hiace, Toyota Raum, and Toyota Lite Ace) to several plots around the Kampala Metropolitan area. Palatial houses were erected on the plots.

Another file had other seemingly mundane names—Enock Katwesigye alias Col Frank and Bwayo Martin alias Capt Bob.

The trio allegedly acquired Shs17.5 billion at Stanbic Bank knowing that these were proceeds of crime. Prosecution contended that the tricks deployed were the kind the Anti-Money Laundering Act frowns upon.

These cases give a flattering portrait of how Uganda has become the ideal place to rinse stained money. The cases are in the in-tray of Anti-Corruption Court justices Lawrence Gidudu, Margaret Tibulya, and Jane Okuo Kajuga.

Despite Uganda being a heartbeat away from being added to the money laundering blacklist, justices of the court remain cautiously optimistic. It could be because the cases are not transnational.

“The cases we have in this court are those of Bafere (conmen) around town and I don’t think these are the cases that have led Ugandan into being grey-listed,” Justice Gidudu, who has headed the court since 2015, said in an interview, adding, “Those that have led to the trouble we are in, are very sophisticated transactions.”

Illicit financial flows

In a 2015 report, the High-Level Panel on Illicit Financial Flows from Africa projected that the continent loses more than $50b (about Shs183 trillion) a year in criminal financial flows. Uganda was reported to lose on average $509m (Shs1.9 trillion) in illicit outflows per year.

Besides illegal wildlife trade—which is the fourth largest criminal activity globally on account of $7b (Shs25 trillion) to Shs23b (Shs91trillion) generated per year—several people Saturday Monitor talked to pointed to gold mining as one of the sectors that facilitates money laundering in Uganda.

The precious metal has over the years eclipsed coffee to become Uganda’s most significant export. These totalled $1.7 billion between November 2019 and December 2020.

“We have [illegal] wildlife trade going on here. You know how we have been having all these gold exports which can’t be explained. Reports say it’s from the [Democratic Republic of] Congo yet we are exporting it as ours,” a former senior prosecutor at the Anti-Corruption Court who is now in private practice, told Saturday Monitor.

“People who get involved in such activities can’t be prosecuted because they are politically protected.”

“You get money through human trafficking, you get money through corruption, you get money through illegal wildlife and then you launder it by taking it offshore or by getting assets here. That’s how money is laundered,” the prosecutor added, noting that the accused are rarely investigated thanks to their deep connections.

Following years of sustained pressure from the Financial Action Task Force (FATF), a Paris-based intergovernmental organisation created in 1989 at the behest of the G7 to combat money laundering, Uganda enacted the Anti-Money Laundering Act in 2013.

 The Financial Intelligence Authority (FIA) was later instituted by the government to monitor, investigate, and prevent money laundering in the country.

In 2020, the agency gained prominence for hunting down frozen accounts of non governmental organisations (NGOs) deemed to have been sympathetic towards the opposition.

When its Executive Director, Mr Sydney Asubo, went to Parliament in January of 2022 with clouds gathering in the sky, he had much more to talk about then the fate of the NGOs.

A metaphorical storm was brewing after the Financial Action Task Force (FATF) threatened to blacklist Uganda. The May 2022 deadline it gave the government to have in place practical steps to stem money laundering is upon us.

“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,” Mr Asubo told Saturday Monitor a fortnight ago, adding, “Some people have already started feeling the impact…international transactions, which would take a day or two, are now taking a week or two. That process of scrutiny is beyond the normal scrutiny.”

To compound matters, WorldRemit—a digital payments service that provides international money transfer and remittance services in more than 130 countries and over 70 currencies—announced this past week that it is severing ties with Uganda.

 In a statement, WorldRemit said it had stopped “providing send services and will not be accepting any new transactions sent from Uganda starting June 6.”

Swift ban looms?

Uganda also risks being booted from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), something that would knock the economy sideways.

“It means you can’t do a trade because…you can’t use the dollar…as long as you use machines, dollars from Uganda will not be accepted,” Justice Gidudu said of SWIFT.

The FIA has promised to bring in a raft of measures to steer the country back from the precipice. These include: seeking international cooperation in line with the country’s risk profile; developing and implementing risk-based supervision of financial institutions and designated non-financial businesses and professions (including lawyers, casinos, and real estate agents, among others).

Other measures include ensuring that competent authorities have timely access to accurate basic and beneficial ownership information for legal entities; demonstrating that law enforcement agencies and judicial authorities apply the money laundering offence consistent with the identified risks; establishing and implementing policies and procedures for identifying, tracing, seizing and confiscating proceeds and instrumentalities of crime; demonstrating that law enforcement agencies conduct terrorist financing (TF) investigations and pursue prosecutions commensurate with Uganda’s TF risk profile; addressing the technical deficiencies in the legal framework to implement PF-related targeted financial sanctions; and implementing a risk-based approach for supervision of its non-profit organisations sector to prevent TF abuse.

Bank of Uganda (BoU), under its supervisory role of commercial banks, is expected to play a leading role in the fight against money laundering. It has, however, been called out for putting in a feeble performance.

“If there was a platform on which the central bank supervises all transactions of the commercial bank then they would have been in a position to fight this crime,” retired Justice David Wangutusi, who served at the Commercial Court and Anti-Corruption Court, said, adding, “The central bank only gets to know transactions that are disclosed by the commercial banks….the banks will never voluntarily disclose certain details of their clients.”

Ms Charity Mugumya, the BoU’s Director of  Communications, says combating money laundering needs a multi-sectoral approach.

 She adds that “AML/CFT (Anti-Money Laundering/Combating Finance Terrorism) is not just a banking sector matter, but rather one that affects various MDAs (ministries and departments and agencies).”

“After the conclusion of the current FATF/ICRG (Financial Action Task Force/International Country Risk Guide) face-to-face review meetings with representatives of affected MDAs, the national taskforce shall provide a statement/brief on Uganda’s status.”

Work cut out

Yet state actors are not pulling in the same direction. This was evident in the case of Uganda versus Sundus Exchange Transfer (and its directors).

 Sundus had about $45 million in Stanbic Bank, which it said was going to be invested in Uganda. Kenyan Authorities notified the FIA and the Directorate of Public Prosecutions (DPP) that Sundus’s directors were being investigated for having links with terrorists.

Sundus’s lawyers unsuccessfully argued that their clients were being targeted because of their nationalities. Unmoved, the Anti-Corruption Court froze Sundus’s accounts.

Justice Gidudu ruled: “I’m fortified in reaching this conclusion because of the strange manner in which the respondents carried out business. It was strange that the first respondent [Sundus] receives money on behalf of other respondents who also have bank accounts.

“The first respondent keeps the money for some time after it has accumulated he sends it to respondent two [Haleel commodities] who distributes it to respondents abroad. This movement of money between bank accounts in a consistent pattern gives credence to suspicion which the states have a duty to verify through investigations.

“The Investigations should establish if the commercial banks where these accounts are domiciled are complicit or not.”

This ruling didn’t last long as Sundus secured an order unfreezing their account in Stanbic Bank from the High Court’s Civil Division. Their lawyers presented clearances from security agencies such as Chieftaincy of Military Intelligence (CMI), Internal Security Organisation (ISO ) and the police’s Criminal Investigations Department (CID). The directors of Sundus have since left the country.

“The suit [in the civil division] stopped the investigation and prosecution of the matter because the office was relying on the money to prove its case. The case files were therefore closed,” the DPP’s publicist Ms Jacquelyn Akol Okui said, adding, “We lack non-conviction-based asset recovery laws. Under the current legislation, crime proceeds can only be confiscated after conviction of an accused person.”

Ms Okui also notes that technological advancements have exacerbated things.

“People who engage in money laundering use sophisticated means to conceal, disguise and move illicit finances, the latest being cryptocurrency which operates and thrives on anonymity. This creates a detection challenge,” she said.

A painstakingly long process that also loops in diplomatic channels where the money is coming from further complicates things.

“The DPP must go to the Attorney General who then takes to Foreign Affairs and then Foreign Affairs has to contact the government of the country where the source of money is believed to be,” Justice Gidudu said, adding, “Recall these are diplomats who take long to respond yet prosecution normally has to be quick.”

Though crime is getting more sophisticated for the liking of prosecutors, the Judiciary insists that the problem lies elsewhere.

“All the judges here have been trained in money laundering techniques and Justice Tibulya represents us at an East African body of judges that are dealing with corruption and money laundering,” Justice Gidudu revealed, adding, “The problem is that we are waiting for those engaging in real money laundering, but we don’t see them. We shall keep on waiting.”

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