On 23 February 2024, Uganda achieved a significant milestone as it was removed from the Financial Action Task Force (FATF) "Grey List". The FATF, recognizing Uganda's efforts, acknowledged the country's commitment to combating money laundering and terrorist financing, elevating its global standing in the realm of financial security.
The FATF's "Grey List" comprises countries identified with strategic deficiencies in their Anti-Money Laundering (AML) and Combating the Financing of Terrorism Counter-Terrorist (CFT) regimes, which in turn necessitates enhanced monitoring and corrective actions. When a country finds itself on this list, it has to commit to promptly addressing the identified deficiencies within agreed timeframes while being subjected to heightened scrutiny.
Since February 2020, Uganda embarked on a collaborative journey with the FATF and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) to fortify the effectiveness of its AML/CFT regime. Uganda's AML/CFT framework, established through the Anti-Money Laundering Act, 2013, and the Anti-Money Laundering Regulations, 2015, forms the legal basis for combating money laundering and terrorist financing. However, the mere existence of legislation does not ensure effective implementation AML/CFT strategies. Thus, Uganda developed and implemented risk-based supervision of financial institutions and designated non-financial businesses and professions in conformity with the directives of the FATF.
The FATF outlined specific recommendations for Uganda, emphasizing the adoption of national cooperation and coordination for AML policies and the implementation of measures to ensure effective monitoring and compliance within money or value transfer services.
Previously, the FATF had expressed concern over Uganda's failure to complete its action plan, which expired in May 2022. Uganda faced mounting pressure to demonstrate significant progress by October 2023 to avert potential repercussions. This prompted swift legislative action, with Ugandan lawmakers enacting amendments and regulations aligned with FATF recommendations and standards.
Uganda's Legislative Response to FATF Recommendations
The urgency to enhance Uganda's reputation and evade potential blacklisting by the FATF propelled the government into action resulting in legislative efforts aimed at enhancing transparency and regulatory compliance within her financial systems. Among the actions taken was amendments to several key laws, which included the Companies (Amendment) Act 2022, the Partnership (Amendment) Act 2022, and the Trustees Incorporation (Amendment) Act 2022, alongside the enactment of the Companies (Beneficial Owners) Regulations, 2023.
These legislative changes mandate entities such as partnerships, trusts, and companies to maintain comprehensive registers of their beneficial owners. The required information includes the names, postal addresses, national identification numbers, dates of entry and cessation as beneficial owners, and any other details as may be prescribed by regulations. These requirements are specifically stipulated under section 52A of the Partnership (Amendment) Act 2022, section 3A of the Trustees Incorporation (Amendment) Act 2022, and section 119A of the Companies (Amendment) Act 2022.
Furthermore, the Companies (Beneficial Owners) Regulations, 2023, mandate companies to maintain registers containing beneficial ownership information and promptly notify the registrar of companies through the filing of a beneficial ownership form at the Uganda Registration Services Bureau (URSB). Non-compliance with these regulations carries substantial penalties, including the refusal of subsequent filings on the company file and statutory fines of UGX 500,000/= (Uganda Shillings Five Hundred Thousand Shillings only) or USD 135 (United States Dollars One Hundred Thirty-Five) per corporate officer for every day of default.
These stringent measures were all aimed at combating criminal activities such as capital flight, tax evasion, corruption, money laundering, and terrorism financing while promoting transparency in the ownership and control of Ugandan legal entities.
Implications for Uganda's Financial Landscape
Uganda's recent removal from the FATF Grey List marks a significant milestone in the financial landscape, ushering in an era defined by heightened regulatory compliance and enhanced transparency. This achievement underscores Uganda’s commitment adherence to international AML/CTF standards, paving way for broader access to financial markets and increased foreign investment inflows.
This accomplishment demonstrates Uganda's steadfast commitment to upholding robust AML/CFT measures. We also note that there will be enhanced integrity and transparency within the financial sector, thus alleviating compliance burdens for financial institutions and businesses. This in turn, fosters investor confidence.
We further note that the implementation of risk-based supervision of financial institutions and designated non-financial businesses and professions, enables the country to identify and mitigate potential risks more effectively. This proactive approach will certainly help the financial system from illicit activities such as money laundering and terrorist financing and financial loss. Furthermore, a well- established and functioning AML/CFT regime contributes to the overall stability of the financial system. All in all, aligning Uganda’s AML/CFT strategies with FATF directives not only enhances Uganda's standing in the global financial community but also facilitates international cooperation enabling Uganda to engage more seamlessly in cross- border transactions.
Disclaimer:
The information provided in this article is for general informational purposes only and should not be construed as legal advice. If you have specific legal question(s) or concern(s), please contact the authors and/or a qualified legal professional directly for guidance.