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 9th 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.
