Ezaruku Draku Franklin

Matia Kasaija, the minister of finance, planning, and economic development was in a buoyant mood on Tuesday congratulating himself and the country for escaping financial blacklisting at the global level.

The country was removed from the global financial grey list on the last asking, after spending three years in the financial integrity wilderness. If it had failed this last chance, Uganda would have been pushed to the blacklist, which would condemn the country into financial misery because investors would shun the country and international financiers would also close gates to the country because of the added risk.

The Black List is a list of countries that are thought to pose a high risk of money laundering, terrorist financing, and proliferation financing, due to their significant strategic deficiencies in that regard. FATF calls on its members and other jurisdictions to apply enhanced due diligence and, in the most serious cases, to apply countermeasures to these countries.

Currently, only three countries including the Democratic People’s Republic of Korea, Iran, and Myanmar are on the dreaded blacklist.

Kasaija on Tuesday breathed a sigh of relief and said the country is finally on the right track and will make sure it doesn’t backslide.

“I am very pleased to announce that the financial action task force has removed Uganda from its grey list. In February 2020, Uganda was placed on the gray list of countries under increased monitoring and given a list of 22 action planned items to remedy our shortcomings. Had Uganda failed to fulfill these actions, the country would have been at a risk of being blacklisted that is terrible. This would have adversely affected the ability of a financial institution to conduct international financial transactions and international businesses in general,” he said.

“Furthermore, the fact of sanctions would have prohibited other foreign financial institutions from dealing with their Ugandan counterparts of the financial sector,” he added.

The finance minister said the placement of Uganda on the grey list set in a flurry of activities back home, forcing the government to make a raft of changes to comply with the international anti-money laundering standards. These included amending different laws including the beneficial ownership requirements, combating terrorism financing, and many others.

“However, since being placed on the grid, I have worked tirelessly to demonstrate commitment and implement the satisfaction plan. I’m delighted that these efforts have now come to fruition. The removal of Uganda from the grey list represents a significant achievement for our country. It demonstrates the integrity of our financial system, reaffirms our commitment to effective regulation, and enhances our standing within the international community,” he said.

To the investors, Kasaiaja said “the message from FATF is clear. Uganda is the safe place to invest, our removal from the grey list unlocks a host of benefits for Uganda’s economy. It will build investor confidence, reduce the cost of doing business, and reinforce our global reputation.”

Financial incentives.

Kasaija said the removal from the grey list and escape from being condemned to the dreaded black list presents an open opportunity for the country to reap big from global financial markets, which he said will spur further development.

“We will now have unrestricted access to international markets and credit, providing a vital boost to government’s socio-economic transformation efforts. By aligning our anti-money laundering and countering terrorism financing measures with international standards, Uganda can now engage seamlessly with the global financial system,” he said before adding that “This will facilitate trade, enhance competitiveness, and provide more opportunities for economic diversification and integration into global value chains.”

He said the Government of Uganda is committed to sustaining the excellent progress made and that this will be achieved through the post-exit strategy including “continuous review of our legal framework, sustained capacity of all relevant to effectively combat money laundering, financing of terrorism and reprisal and ongoing engagement with the trade sector.”

Uganda’s exit from the realist has been the result of concerted efforts from a wide range of stakeholders. We have passed an important milestone on our pathway to prosperity. Uganda is off the FATF list, and our financial system is growing from strength to strength. Let us celebrate this achievement and continue our efforts to deliver a socio-economic transformation for all of you guys. Congratulations, Ugandans and Uganda,” he said.

How Uganda went down the grey list direction

Uganda underwent a second Mutual Evaluation in 2015/2016 that was conducted by the East and Southern Africa Anti-Money Laundering Group (ESAAMLG) and the Mutual Evaluation Report produced was adopted at the ESAAMLG Plenary meeting held in April, 2016.

The report identified new strategic AML/CFT deficiencies, relating to effectiveness of Uganda’s AML/CFT framework. Uganda scored “Low” rating in all the eleven Intermediate and as a result, met the criteria under the new Methodology and was placed under a one-year observation period that ended in December, 2019.

In January, 2020 the ICRG assessed and noted that Uganda had not made significant progress in addressing its strategic deficiencies. As a result, in February, 2020 the FATF placed Uganda on its grey-list and was subjected to enhance monitoring by the International Cooperation Review Group (ICRG) of FATF.

The Post Observation Period Report arising from the assessment conducted in December 2019 by the ICRG Africa/Middle East Joint Group (JG) and the outcome of the JG’s face-to-face meeting with Ugandan Officials, held in Rabat, Morocco in January 2020, indicated overall that Uganda had not made tangible and positive progress towards increasing Effectiveness with respect to ten (10) Immediate Outcomes, which were rated Low. Accordingly, the ICRG drafted an action plan that was agreed upon with the officials of the Ugandan delegation for Uganda to address the deficiencies relating to the effectiveness of the AML/CFT regime.

The detailed Action Plan for Uganda was prepared in February, 2020 and had most of its action plan time-lines reviewed and extended to latest May 2022 in light of the challenges caused by the covid-19 pandemic.

It is a procedural requirement that once an Action Plan has been agreed with the ICRG, then the country has to confirm in writing to the President of FATF its political commitment to implement the Action Plan. Subsequently, on February 11, 2020, the Minister of Finance, Planning and Economic Development wrote to the President of FATF to confirm the political commitment, by the Government of Uganda, to fully address the remaining deficiencies in Uganda’s AML/CFT Regime, including the expeditious implementation of the Action Plan

On March 3, 2020, the President of the Financial Action Task Force (FATF) wrote to Uganda highlighting the February 2020 FATF Plenary decision to identify and place Uganda on the public document (grey-list) which, is a list of Jurisdictions subject to increased Monitoring by the ICRG of FATF, this effectively put our plan into action up to now.

The key action required of Uganda to address strategic AML/CFT deficiencies

Under the terms of the agreement, government was required to adopt a National AML/CFT Strategy; seek international cooperation in line with the country’s risk profile; develop and implement risk-based supervision to Financial Institutions and Designated Non-Financial Businesses and Professions (DNFBPs); and ensure that competent authorities have timely access to accurate basic and beneficial ownership information for legal entities.

Uganda was also required to demonstrate that Law Enforcement Agencies and judicial authorities apply the Money Laundering offence consistent with the identified risks; establish and implement policies and procedures for identifying, tracing, seizing and confiscating proceeds and instrumentalities of crime; demonstrate that Law Enforcement Agencies conduct Terrorism Financing investigations and pursue prosecutions commensurate with Uganda’s Terrorism Financing risk profile; and address the technical deficiencies in the legal framework to implement Proliferation Financing-related Targeted Financial Sanctions and implementing a risk-based approach for supervision of its Non-Profit Organizations (NPOs) sector to prevent abuse for Terrorist Financing (TF) purposes.

At its October 2023 plenary, the FATF made the initial determination that Uganda had substantially completed its action plan and approved an on-site assessment to verify that the implementation of AML/CFT reforms had begun and was being sustained, and that the necessary political commitment remains in place to sustain implementation in the future. 

Mr Samuel Were Wandera, the Executive Director of the Financial Intelligence Authority said Uganda met all the requirements and was as a result removed from the grey list. He said there is a global standard which requires that every country puts in place mechanisms which make their countries not to be used by the criminal actors either domestically or from the international community, which Uganda has complied with.

“When assessment was done on Uganda, there were some deficiencies which the government of Uganda worked on to ensure that those weaknesses were addressed. Some of them required amendments to our laws, putting in systems to train our staff and also address the questions of the beneficial ownerships and the company’s operations. For those of you who operate bank accounts you have seen banks asking you declare and also the URSB has recently struck off the company’s register some of the companies that failed to declare their beneficial ownership information,” Wandera said.

Henry Musasizi, the state minister for finance, planning and economic development who has been directly in charge of implementing the requirements and had to face the parliament in amending the required laws said Uganda had moved in the right direction and complied. He said beneficial ownership which had been a blackspot to the country was finally cleared and that companies by law must comply with the requirement.

“We amended a number of laws and made new ones including the company’s act, the partnership act, and tax laws. Everywhere now in our laws where beneficial ownership exists, we have robust legal regime that compels companies to disclose who actually derives benefits from the company. It does not only stop at the directors, but goes to look for those who derive benefits from the company and this was one of the reasons why Uganda was placed in the grey list. However, we satisfactorily convinced the committee that indeed our laws after the amendments were robust enough to provide for all the disclosures of the beneficial ownerships,” he said