General view of the capital city of Kampala, Uganda. Any financial transaction above $10,000 is considered a large transaction and must be reported to the FIA under Ugandan laws.
A parliamentary decision to remove NGOs and churches from the list of reporting entities under Uganda’s anti-money laundering laws is likely to minimise overregulation and cut compliance costs, while presenting a rare political victory for the country’s troubled NGO sector.
This development bears a stark contrast to years of political harassment and oppression suffered by NGOs since 2010.
Political hostility unleashed on NGOs is reflected in arbitrary arrests of civil society field staff engaged in environmental conservation activities in the oil-rich Albertine region, controversial closure of bank accounts belonging to Action Aid and Chapter Four Uganda in the past, and police reluctance to release criminal investigation reports surrounding previous burglary incidents reported at certain NGO office premises.
Removal from the list of accountable persons provided for under the Anti Money Laundering Act of 2022 and its regulations as amended implies NGOs and churches will be exempt from filing annual Anti Money Laundering/Combating of the Financing of Terrorism (AML/CFT) compliance reports to the Financial Intelligence Authority (FIA), submission of suspicious transaction reports on money laundering and terrorism-related incidents and large transaction reports.
Any financial transaction above $10,000 is considered a large transaction and must be reported to the FIA under Ugandan laws.
Under the new compliance arrangement, overall licensing requirements tied to NGOs will be handled by the NGO department in the local Ministry of Internal Affairs, while commercial banks are obliged to monitor NGOs' financial transactions in line with a risk-based enforcement strategy adopted by the government.
Consequently, AML/CFT enforcement actions will be restricted to selected NGOs that bear significant risks of money laundering and terrorism financing in their operations according to sources.
The list of accountable persons captured under the Anti Money Laundering Act (AML) of 2022 and its regulations includes commercial banks, insurance companies, forex bureaus, credit institutions, microfinance institutions, law firms, accounting and audit firms, mineral dealers, cryptocurrency traders and stockbrokers among others.
“That amendment is intended to correct the problem of over-regulation in our AML/CFT compliance regime. The Financial Action Task Force recommendation eight does not require the designation of NGOs and churches as accountable persons within the context of the AML Act but allows for a risk-based approach that is focused on a few high-risk NGOs.
"The international donors had nothing to do with this matter but it is a result of extensive deliberations between the government and the NGO sector over the past few years. The Minister of Finance has powers to remove or add any entity to the accountable persons list depending on their AML/CFT risk exposure levels,” said Samuel Were Wandera, the Executive Director at Uganda’s FIA.
However, the actual size of compliance cost savings arising from this regulatory change within the NGO sector is less clear.
“The timing of this development is interesting. I thought the government would be keen on curtailing NGOs’ activities in the run-up to the 2026 general elections! But the miserable state of the economy might have compelled the government to act otherwise. Someone in the finance ministry told me they have noticed declining growth in Pay As You Earn (PAYE) taxes and National Social Security Fund contributions since last year and this implies financial distress problems in our middle-class population. NGOs contribute a lot to employment and foreign exchange inflows and cannot be ignored in the economic growth equation,” said a private lawyer who requested anonymity, citing confidentiality obligations.
Uganda was removed from the Financial Action Taskforce (FATF) greylist in February 2024 after four years of agony and tension. The FATF greylist refers to a list of countries that suffer from weak AML/CFT compliance standards and are subject to tight scrutiny in the international financial system. Prominent African countries that feature on the FATF grey list include South Africa and Nigeria.
“NGOs and government have been meeting quarterly over the past three years for purposes of harmonizing policy positions and plugging information gaps. This development is one of the fruits of that regular discourse. AML/CFT compliance work is very expensive for NGOs because it involves hiring specialists for the job, buying software, and training staff as well. For example, compiling an organizational AML/CFT risk assessment might cost as much as Ush20 million ($5,400) for some NGOs depending on their size but our donors are not willing to spend on such items. However, the government has coordinated well on AML/CFT compliance improvement matters before Uganda’s exit from the FATF grey list last year,” explained Marlon Agaba, Executive Director at the Anti-Corruption Coalition of Uganda.
“Many NGOs argue that the current restrictions are too broad, with excessive red tape hindering their work. We believe this approach strikes a balance between security concerns and the need for a thriving civil society. Notably, the reforms eliminate the burdensome reporting requirements previously imposed on NGOs and NPOs classified as ‘accountable persons.’ This change is expected to ease operational challenges, allowing organizations to continue their work without unnecessary regulatory hurdles,” noted Theo Klein, a South African economist based at Oxford Economics Africa Limited.
