By our Reporter

After narrowly escaping the global financial blacklisting, Uganda has intensified its monitoring of loopholes that dragged it to the financial grey list and the country is embarking carrying out risk assessment to all the virtual services and their providers.

Officials from both the Financial Intelligence Authority and the Financial Technologies Services Providers’ Association say this is a new area that had previously not been catered for when dealing with money laundering and risks of terror financing. The global Financial Action Task Force equally says this is a grey area in money laundering and terror financing which criminals continue to exploit to wreak havoc on the financial sector.

Virtual asset refers to any digital representation of value that can be digitally traded, transferred or used for payment. It however does not include the digital representation of fiat currencies. They among others include Blockchain, bitcoin, crypto assets, and virtual currencies, which FATF says are a whole new vocabulary describing innovative technology to swiftly transfer value around the world.

The FATF standards ensure that virtual assets are treated fairly, applying the same safeguards as the financial sector.

Mr. Cyrus Barigye, the Director ICT Systems & Security at the Financial Intelligence Authority who represented Mr Samuel Wandera, the Executive Director of the authority during a training for the new members of the formation of the National Working Group on the Money Laundering (ML)/Terrorism Financing (TF) Risk Assessment for Virtual Assets (VA) and Virtual Assets Service Providers (VASPS), on Thursday last week said they will embark on risks assessment of all the virtual service providers.

Though Barigye did not give the timeline on the risk assessment, he said they will use internationally recognized tool to carry out the exercise.

“The ML/TF risk assessment will be conducted using the World Bank’s VA Risk Assessment Toolkit. This well-established and internationally recognized tool provides a structured approach for identifying, analyzing, and prioritizing ML/TF risks associated with Virtual Assets and Virtual Asset Service Providers, Mr Barigye who represented Mr. Wandera stated.

According to the Financial Action Task Force, virtual asset and their service providers are a new sector in most jurisdictions and face significant money laundering and terrorist financing risks. The Financial Action Task Force has taken action to respond to the very real risk that legitimate services offered by virtual asset service providers will be abused by criminals and terrorists to launder money and finance terrorist acts.

Barigye said with robust structures in place, Uganda can go the length in combating money laundering and terror financing.

“By utilizing the World Bank’s toolkit, we will be guided through a structured methodology through a clear and comprehensive risk assessment process, ensuring consistency and thoroughness. I am confident that through our collaborative effort, supported by the expertise of UNODC and the World Bank, Uganda can develop a comprehensive and effective ML/TF risk assessment for Virtual Assets and Virtual Asset Service Providers in Uganda,” he added.

Officials from the Financial Technologies Services Providers’ Association (FITSPA) yesterday offered a guarded response, saying it is still a new initiative which they will first internalize before issuing a formal response. Zianah N Muddu, the Team Lead at FITSPA however welcomed the move by the FIA, but said it was too early to talk into details about how the whole assessment will be done and what the outcome will be.

“Unfortunately I am unable to give you a response because it is still a new initiative and we have just started. However we know that it is a good thing for the finance sector ecosystem. It is good for the good of the members, of the whole economy,” she said.

Uganda was removed from the global financial grey list on the last asking, after spending three years in the financial integrity wilderness. Immediately after removing the country from the list, Matia Kasaija, the country’s finance minister went lyrical, singing how the country was now one of the best investment destinations that will attract huge Foreign Direct Investments.

“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,” he said.

He however said the country had learnt its lessons the hard way and would work hard to ensure that Uganda does not slip back.

During the closure of training of the new members last week, Barigye said the training equipped members of the national working group with a thorough understanding of Virtual Assets, Virtual Asset Service Providers and associated Money Laundering/Terror Financing risks; deepen knowledge of Financial Action Task Force Recommendations 1(One) and 15 for effective risk assessment and introduce the World Bank’s Virtual Asset Risk Assessment Toolkit for data aggregation and analysis.

The capacity-building workshop attracted diverse experts from both the government and private sectors with a focus on collaboratively addressing the challenges and opportunities presented by the rapidly evolving technological landscape.

Barigye, said: “by pooling our resources, sharing best practices, and fostering a spirit of collaboration, we can develop a robust framework for regulating and supervising Virtual Assets and Virtual Asset Service Providers in Uganda.” and added that “the effectiveness of our national ML/TF risk assessment hinges on the collective knowledge, diverse perspectives, and open communication fostered through such a gathering.”

He said this framework will not only safeguard Uganda’s financial system from potential misuse but also create a conducive environment for responsible innovation and technological advancement within the virtual asset ecosystem.

The Executive Director reiterated that the Financial Action Task Force (FATF) Recommendations are the cornerstone of a global framework for combating money laundering, terrorist financing and proliferation financing. He cited two specific recommendations that are particularly relevant to the workshop objectives namely, FATF Recommendation 1, which emphasizes the importance of a risk-based approach to Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT).

The workshop delved into the application of the said recommendation/principle to the VA/VASP sector, equipping the participants with the tools and knowledge to conduct a targeted and efficient risk assessment.

The workshop participants were also asked to interest themselves in FATF Recommendation 15 which specifically focuses on the regulatory response to new technologies, including Virtual Assets and Virtual Asset Service Providers. According to the FIA boss, uunderstanding this recommendation allows the members to ensure that Uganda has a sound framework in place to regulate and supervise VASP activities, effectively mitigating ML/TF risks while fostering responsible innovation.

Uganda will undergo its next Mutual Evaluation process by the FATF in 2028. This rigorous process will assess Uganda’s compliance with all 40 FATF Recommendations, and officials say the successful completion of this evaluation will solidify Uganda’s commitment to international AML/CFT standards.

Before embarking on the complex undertaking of ML/TF risk assessment, Mr. Wandera stressed, it was imperative for the members to equip themselves with a thorough understanding of Virtual Assets, Virtual Asset Service Providers, and the associated ML/TF risks.