Anti-money laundering law faces challenges – daily monitor

Effective implementation of the Anti-Money Laundering law in Uganda might be hampered by the large informal sector in the economy, Bank of Uganda official has said.

While presenting a paper on the Anti-money-Laundering (AML) Act last week, Mr Titus Mulindwa, deputy legal counsel, BoU said that with majority of transactions in the country being made in cash; it is difficult to track such monies in the formal system, creating a gap that can be exploited by money launders.

“It is difficult to track and monitor informal financial transactions which don’t go through the formal banking systems and yet some of this money might be ‘dirty’.

“It will be challenging to effectively implement the law unless the ‘informality’ challenge of Uganda’s economy is addressed,” Mr Mulindwa told participants at an insurers’ consensus building workshop in Kampala.

Uganda has a large informal sector, spanning activities such as construction, agriculture, metal welding and general merchandise trade among others, with proper business addresses.


The large informal sector has also made it difficult for Uganda Revenue Authority to find a right strategy which can be used to tax the informal sector, despite being in dire need to expand its taxable base.

Uganda’s AML Bill was passed by Parliament in July this year, joining other countries in the region including Kenya, Rwanda and Tanzania, to put in place laws that seek to crackdown on the vice of cleaning illegitimate cash – gained from corruption and drug trafficking activities among others – through the formal financial system.

Much as the president is required to assent to the Act within 30 days after being approved by parliament for it to become law, he is yet to do so, almost two months later. Why money laundering is done If not prevented, money laundering can undermine the integrity of financial institutions and thus public confidence in the country’s banking industry, undermine financial stability and cause highly destabilising financial flows across borders.

The law will apply to regulatory and supervisory bodies and persons who carry on business or professions susceptible to money laundering among others.

Mr Mulindwa further said that there is need to build capacity and the necessary infrastructure needed to implement the AML regime, in addition to fast-tracking the national identity card project to address the identification challenge.

The Assistant Commissioner, directorate of economic affairs, office of the president, Mr Michael Olupot-Tukei, recently told insurance companies’ chief executives to desist from insuring risks of prospective customers who decline to provide full information needed by the latter to establish the true identities of the former, arguing that they could be involved in money laundering.

He also urged insurance companies to put in place policies that will help them do customer due diligence to establish the identity and the background of the customer for financial risks assessment, in addition to training employees on how to detect a suspicious transaction to guard against money laundering.

The Act provides for the establishment of a Financial Intelligence Authority that would have unlimited access to any suspicious accounts for purposes of carrying out investigations into the source, destination and recipients of the money.

The AML law criminalises money laundering and according to the Act, persons involved in the activity or transactions would be liable to imprisonment for a period not exceeding 15 years or a fine not exceeding Shs2 billion or both. Definition of anti money laundering 1/2 next

Effective implementation of the Anti-Money Laundering law in Uganda might be hampered by the large informal sector in the economy, Bank of Uganda official has said.

While presenting a paper on the Anti-money-Laundering (AML) Act last week, Mr Titus Mulindwa, deputy legal counsel, BoU said that with majority of transactions in the country being made in cash; it is difficult to track such monies in the formal system, creating a gap that can be exploited by money launders.

“It is difficult to track and monitor informal financial transactions which don’t go through the formal banking systems and yet some of this money might be ‘dirty’.

“It will be challenging to effectively implement the law unless the ‘informality’ challenge of Uganda’s economy is addressed,” Mr Mulindwa told participants at an insurers’ consensus building workshop in Kampala.

Uganda has a large informal sector, spanning activities such as construction, agriculture, metal welding and general merchandise trade among others, with proper business addresses.

The large informal sector has also made it difficult for Uganda Revenue Authority to find a right strategy which can be used to tax the informal sector, despite being in dire need to expand its taxable base.

Uganda’s AML Bill was passed by Parliament in July this year, joining other countries in the region including Kenya, Rwanda and Tanzania, to put in place laws that seek to crackdown on the vice of cleaning illegitimate cash – gained from corruption and drug trafficking activities among others – through the formal financial system.

Much as the president is required to assent to the Act within 30 days after being approved by parliament for it to become law, he is yet to do so, almost two months later. Smurf money laundering If not prevented, money laundering can undermine the integrity of financial institutions and thus public confidence in the country’s banking industry, undermine financial stability and cause highly destabilising financial flows across borders.

The law will apply to regulatory and supervisory bodies and persons who carry on business or professions susceptible to money laundering among others.

Mr Mulindwa further said that there is need to build capacity and the necessary infrastructure needed to implement the AML regime, in addition to fast-tracking the national identity card project to address the identification challenge.

The Assistant Commissioner, directorate of economic affairs, office of the president, Mr Michael Olupot-Tukei, recently told insurance companies’ chief executives to desist from insuring risks of prospective customers who decline to provide full information needed by the latter to establish the true identities of the former, arguing that they could be involved in money laundering.

He also urged insurance companies to put in place policies that will help them do customer due diligence to establish the identity and the background of the customer for financial risks assessment, in addition to training employees on how to detect a suspicious transaction to guard against money laundering.

The Act provides for the establishment of a Financial Intelligence Authority that would have unlimited access to any suspicious accounts for purposes of carrying out investigations into the source, destination and recipients of the money.

The AML law criminalises money laundering and according to the Act, persons involved in the activity or transactions would be liable to imprisonment for a period not exceeding 15 years or a fine not exceeding Shs2 billion or both. Money laundering cases 1/2 next