Clock ticking as Uganda stays on finance grey list

The Financial Action Task Force (FATF) has kept Uganda on the grey list that captures countries with deficiencies in their Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) controls.

Now, Uganda has until the end of June to make improvements lest more action be taken against the nation.

More action could mean Uganda being placed on the FATF’s blacklist which currently features Myanmar, Iran and North Korea.

In the past, Uganda has narrowly avoided being added to the organisation’s “black list.” Being included on the black list, often referred to as the “high-risk and non-cooperative jurisdictions” list, can have detrimental effects on a nation’s financial system, economy, and reputation abroad.

The consequences, include more regulatory scrutiny, less foreign investment, and increased financial isolation.

“The FATF expresses concern that Uganda failed to complete its action plan, which fully expired in May 2022. The FATF strongly urges Uganda to swiftly demonstrate significant progress in completing its action plan by June 2023 or the FATF will consider next steps if there is insufficient progress,” the FATF statement reads.

Mr Sydney Asubo, the executive director of the Financial Intelligence Authority (FIA)—a government body, which is charged with enhancing and identifying proceeds of crime and combating of money laundering and terrorism financing—in response to our request for a comment expressed confidence that Uganda would beat the deadline.

“I have been attending the said FATF meetings this week. I am confident that by June 2023, Uganda will have addressed the 7 outstanding issues. Please note that originally there were 22 items for Uganda to address. Of this, we have cleared 15 items, and only seven are outstanding. All the seven outstanding issues are within touching distance of being addressed,” he said.

Mr Asubo has previously warned on the implications of Uganda’s continued stay on the grey list and the graver implications of being put on the black list.

Uganda’s bid to be taken off the grey list was unsuccessful, however, Morocco and Cambodia were given the greenlight.

But, the FATF, headquartered in Paris, France has added South Africa and Nigeria, two of Africa’s largest economies, to the grey list.

The FAFT gave Uganda high marks for progress in its evaluation of Uganda’s efforts to combat money laundering, terrorist financing, and proliferation financing, noting that the country had established and put into practice policies and procedures for identifying, tracking, seizing, and confiscating criminal proceeds and tools, as well as for showing that law enforcement and judicial authorities apply the money laundering offence in a way that is consistent with the risks that have been identified.

Nonetheless, the FATF has directed that Uganda continues to work on implementing its action plan to address its strategic inadequacies, including creating and implementing risk-based supervision of financial institutions (FIs) and designated non-financial firms and professions.

Uganda has also been tasked with addressing technical flaws in the legal framework and ensuring that competent authorities have timely access to accurate and beneficial ownership information for legal entities in order to implement targeted financial sanctions related to proliferation financing (PF).

“The FATF continues to monitor Uganda’s oversight of the NPO [non-profit organisation] sector to encourage the application of the risk-based approach to supervision of NPOs in line with the FATF standards and mitigate unintended consequences,” the FATF statement reads.

The fact that Uganda is still listed on the FATF’s “grey list” indicates that its anti-money laundering and counter-terrorist financing (AML/CFT) regimes have strategic flaws. It indicates that Uganda, for instance, has not successfully put the FATF’s recommendations into practice.

As a result, Uganda is now under more scrutiny from global financial institutions.

About FATF

The Financial Action Task Force (FATF) was founded in 1989. The organisation establishes standards and guidelines for counterterrorism funding and anti-money laundering policies, and it offers training, technical support, and evaluations to assist member nations and jurisdictions in putting these policies into practice successfully. It is based in Paris, France.

It establishes worldwide standards to guarantee that national law enforcement agencies may successfully pursue illegal finances associated with drug trafficking, the illegal arms trade, cyber fraud, and other major crimes.

In order to avoid organised crime, corruption, and terrorism, more than 200 nations and jurisdictions have agreed to put the FATF standards into practice.

BLACK AND GREY LISTS
Two categories of lists are maintained by the FATF to help determine which nations and jurisdictions have strategic flaws in their anti-money laundering and counter-terrorist financing regimes:

A blacklist is used to refer to countries or jurisdictions that are deemed non-cooperative or non-compliant with FATF’s anti-money laundering and counter-terrorist financing (AML/CFT) standards. 

A greylist refers to countries that are identified as having deficiencies in their AML/CFT regimes, but have committed to implementing measures to address those shortcomings. 

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