TO FIGHT CORRUPTION WE MAY HAVE TO RELY ON FOREIGNERS

It was an interesting week last week.

We had President Yoweri Museveni reporting that corruption had sipped into the military establishment, especially with soldiers serving as enforcers in land disputes. It was also the week that finance ministry permanent secretary Ramathan Goobi called for a leaner government, complaining that the cost of public administration had galloped out of control.

 A related story and probably even bigger than the aforementioned was the removal of Uganda from the Financial Action Task Force (FATF) grey list.

The FATF leads global action to tackle money laundering, terrorist financing and the funding of the proliferation of weapons of mass destruction.

"The FATF, while it has been around for at about thirty years, really got its teeth during the fight against terror, that kicked off at the beginning of this century in the aftermath of the attack on the Twin Towers in New York on 9^th September, 2001...

Uganda along with Barbados, Gibraltar and The United Arab Emirates were lifted out of the grey list last month, while Kenya is still there. One of the major requirements that we have only just complied with, is registering ultimate beneficial owners of businesses that was completed at the end of last year.

Companies with unclear promoters were being used to transfer illicit funds and by lifting the veil on these interests, the hope is that it will be plugging one more conduit for transferring ill-gotten wealth.

As mentioned above these moves have gained impetus since the 9/11 attack on the twin towers, as investigations have shown the people responsible used US financial services to fund and  shift resources around.

A failure to comply with standards and a fall into the FATF blacklist or high risk jurisdictions, would have had far reaching implications for the economy.

North Korea, which is on the blacklist, the FATF has advised other countries that deal with it to subject its companies and banks to extra scrutiny and to close their bank branches and end all correspondence relationships with North Korean Banks.

For country with aspirations to ramp up exports, attract foreign direct investment and encourage its citizens in the diaspora to send back more remittances, such action on Uganda would set us back a few decades.

While western economies are targeting bigger fish, our merchants of corruption, if they know what’s good for them need to seat up and take notice.

There will be greater scrutiny by financial institutions on the sources of income of funds and transferring abroad to hide them from local busy bodies, has become that more difficult, not least of all because of the sanctions on financial institutions if they are found to have abetted transfers of illicit funds, means it will not be business as usual.

Which probably explains the increased number of safes in people’s houses and the proliferation of the forex bureau in the suburbs, because if you think about it, it is easier to handle $100,000 than sh390m.

We can expect that in coming times there is going to be an industry built around money laundering to beat not only local anticorruption legislation but the FATF as well.

Expect a few to be caught in coming days, those who think they can do-it-yourself the process and don’t need the experts.

"Of course Uganda whose economy is largely informal, up to 70 percent by some counts, there are still a lot of avenues for people to launder their ill-gotten wealth. But we have to recognize that these too are fast being sealed....

In a previous life if you stole your billion shillings you could go and buy land, start building. Nowadays you have to justify the source of your income to URA and if it has not been taxed URA would charge a hefty 40 percent of the sum. While if you had stolen the money it would not be a bother to pay tax, but you enter a database, which are increasingly becoming integrated and sometime in the future someone may very well pull this fact up.

Or if you have the land already and decided to spend you ill-gotten gains putting up apartments for sale or rent, the issue of the income to build the apartments will come up.

All these means that that it is that much harder to launder money than it was two decades ago.

"It would be naïve to believe that the coalition of the corrupt will see the writing on the wall and scale back on their actions. More likely to happen is that they will go further underground, employ expert money launderers, but at least the impunity will have been toned down....

Ten years ago this columncelebrated the passing of the Anti-corruption law. Even then the cynics dismissed it as a tick box thing to appease western donors. There are a few score of individuals who have gone through the court and are not laughing.

So let us check back in 2034 and see how much the FATF has changed.