The Independent Uganda: You get the Truth we Pay the Price
Kampala, Uganda | THE INDEPENDENT | The fight against illicit financial flows and money laundering is being limited by the lack of knowledge of the industry by the actors, according to the Financial Intelligence Authority (FIA).
According to FIA, the country has put in place most of the regulatory requirements to meet international standards since being put on the ‘grey list’ of the Financial Action Task Force (FATF), a global initiative against money laundering.
Fiona Nabagala, the FIA Manager, Training and Outreach, Anti Money Laundering Unit says, however, that there is still a lot needed for Uganda to be safe, especially as the main conduit sectors, as well as main actors, are not aware of their contribution either to the industry or the fight against it.
Nabagala was speaking on Thursday at a meeting between Members of Parliament and trade and tax information NGOs under the theme: ‘The nexus between illicit financial flows and domestic revenue mobilization’.
She, however, also cited gaps in the laws, including the recently enacted ones like the Anti-money Laundering (Amendment) Act, the Companies (Amendment) Act, 2022; The Partnership (Amendment), 2022; The Trustees Incorporation (Amendment) Act, 2022; The Anti-Money Laundering Act, The Cooperative Societies (Amendment) Act, 2022, and The Anti-Terrorism (Amendment) Bill, 2022.
She cited the inability to confiscate property acquired from illicit funds because it’s not in the laws, while the laws provide for flat penalties irrespective of the size of the offending company.
The meeting was organised by the Southern and Eastern Africa Tax Information Network (SEATINI), the Tax Justice Network Africa, and the Uganda Parliamentary Network of Illicit Financial Flows and tax justice.
Uganda Revenue Authority has also been compiling and prosecuting cases related to money laundering.
Nicholas Muganga, a URA legal officer, revealed that most of the culprits come from countries on the African continent, especially West Africa and the Horn of Africa, but also China.
Muganga says the tax body has been building the capacity to investigate and prosecute cases related to illicit financial flows in collaboration with security agencies.
Dr Ibrahim Mukisa, Senior Lecturer at the Makerere School of Economics, said the fight against illicit financial flows is a continuous process, but that the efforts need constant update.
This is due to the complex nature of the business, made even worse by digital technology.
Mukisa, who is also a member of the Scientific Committee of the African Integration and Development Review at the African Union said that this calls for political goodwill and commitment, including from the MPs who are legislating against IFFs.
The illicit financial flows industry that includes actions like smuggling, especially of precious stones, trafficking in persons and wildlife, and financing terrorism, among others, thrives on weak or lack of regulatory frameworks.
He gave the example of Double Taxation Agreements, which are meant to ensure that investors in either country are not taxed twice on the same product or service.
However, he says, these have been abused especially by the richer parties to the agreements, which are now using them to avoid paying taxes at all, one of the main forms of illicit gains.
The worst treaties Uganda has had are those with the Netherlands and Mauritius, where investors from the two countries hardly pay any taxes.
Gerald Namoma, a Senior Economist at the Ministry of Finance, Planning and Economic Development said negotiations to amend them are at an advanced stage to create equity between Uganda and the other parties, but that the harder one has been the one with Amsterdam.
The event was aimed at enhancing the knowledge of MPs of illicit financial flows, fair taxation, and related legislative frameworks, empowering them for effective policy interventions, drawing a roadmap to address the crime and promote fair taxation in Africa and Uganda in particular, as well as make policy proposals to feed into the African Parliamentary Network on their forthcoming meeting.
Herbert Kafeero, the Communications Head at SEATINI Uganda noted the increased efforts by Uganda To minimize IFFs by making commitments, enacting laws, and strengthening institutions like the FIA and URA.
“Despite these initiatives, the challenge of IFFs is still a growing concern, in addition to the prevailing knowledge gap among stakeholders on understanding IFFs, the impact and initiatives undertaken by the government and the role CSOs and media can play in taking the discussion forward.”
The UN estimates that each year 88.6 billion dollars is lost by Africa to IFFs and this is more than the amount received in official development assistance and foreign direct investment (FDI) respectively.
This is also about half of the financing shortage to achieve the Sustainable Development Goals (SDGs).
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