IMF Urges Bank of Uganda to Strengthen Anti-Money Laundering Efforts to Exit ‘Grey List’
The International Monetary Fund (IMF) has emphasized the importance of Uganda’s Bank of Uganda (BoU) intensifying its efforts to combat money laundering, in order to secure removal from the Financial Action Task Force (FATF) grey list.
Despite government initiatives, Uganda remains on the grey list of nations that haven’t fully addressed money laundering and “terrorism” financing concerns. The FATF, in June, decided to keep Uganda on the grey list due to its failure to meet the May deadline for implementing effective measures against money laundering.
The IMF’s recent Uganda Fourth Policy Review report highlighted both progress and challenges in Uganda’s fight against money laundering. The report acknowledged that the government, with IMF Technical Assistance, had begun developing and implementing risk-based supervision tools for banks to counter money laundering. However, effective supervision was hampered by resource constraints.
Focus on Anti-Money Laundering
The IMF underscored the importance of Uganda’s efforts to complete the remaining action plan items to exit the grey list. These measures include the formulation of policies and procedures for implementing supervisory sanctions and establishing channels to handle non-compliant financial institutions.
Extension Granted by FATF
The FATF, which has extended Uganda’s compliance deadline multiple times, granted the country a four-month extension to October to meet the requirements outlined in the action plan. Failure to meet these requirements could result in Uganda being placed on the FATF blacklist, alongside countries like Myanmar, Iran, and North Korea.
Continued Implementation of Action Plan
The IMF emphasized that Uganda should continue implementing action plan requirements, especially addressing strategic deficiencies. These deficiencies include ensuring timely access to accurate basic and beneficial ownership information for legal entities.
In response to the IMF’s observations, Finance Minister Matia Kasaija and Bank of Uganda Director Research Adam Mugume stated that risk-based tools for banks had been successfully implemented in 2022. Similarly, tools for forex bureaus and money remitters were rolled out in May of the current year. These tools are expected to guide anti-money laundering onsite inspections through a risk-based approach.
Impact on Credit Demand and Accessibility
Interestingly, despite a cautious stance on credit access, businesses did not indicate an increased difficulty in acquiring credit. The report noted that 6% of respondents reported their most recent loan being harder to obtain than previous ones.
Continued Trade-Based Money Laundering Concerns
The report also highlighted ongoing concerns about trade-based money laundering, which remains a sophisticated method for legitimizing illicit financial flows. This method involves manipulating import and export data through over or under-billing, multiple billing, and other deceptive practices.
Digital Commerce’s Role in Money Laundering
The digitization of global commerce has facilitated trade-based money laundering by enabling electronic fraud and document falsification. The report noted that this practice feeds into various criminal activities, including corruption, illicit trade, drug trafficking, human trafficking, and terrorism financing.
Impact on Government Revenue
Trade-based money laundering is estimated to have deprived the Ugandan government of over $6.6 billion (Ush24 trillion) in trade revenue. The report highlighted gold and petroleum products as particularly vulnerable to trade-based money laundering practices.
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