What you need to know:
- The woes of two former URA employees and City socialite Charles Olimi, alias Sipapa, whose employment status isn’t clear, have brought into sharp focus the trend of South Sudanese nationals opting to reject banks in preference for stashing rather huge sums of cash in their houses, consequently triggering money laundering allegations.
Former Uganda Revenue Authority (URA) employees Robert Asiimwe Akanga and Stevens Kalemba were supposed to be tried for charges ranging from abuse of office, theft to committing a felony. But things didn’t go according to plan for the prosecution after it was proven the duo was tortured by security operatives during and in the wake of the arrest.
After hearing from both sides, Justice Lawrence Gidudu, the head of the Anti–Corruption Court, was left with no option but to let the accused duo walk free.
“The cumulative import of all the circumstances that I have listed above confirm that allegations made by the applicants in regard to their arbitrary arrests and subsequent torture to be true,” Justice Gidudu ruled, adding, “A1 [Mr Akanga] and A2’s [Mr Kalemba] non-derogable rights protected by Article 24 and guaranteed by Article 44 (a) of the Constitution of the Republic of Uganda were threatened, infringed upon, and violated. The injuries sustained are gruesome to say the least and confirm that there was torture of A1 and A2.”
Their prosecution, according to Justice Gidudu, raised more questions than answers because of the manner in which they were treated before being brought to court.
“I am satisfied that the applicants [Mr Akanga and Mr Kalema] have demonstrated that their non-derogable rights and freedoms were infringed upon when they were mercilessly battered in the hands of the military that should have had no role in purporting to investigate a criminal case of abuse of office and theft,” the judge ruled, adding, “I hereby declare their trial in criminal session case 1 of 2022 a nullity and acquit them pursuant to Section 11(2) of The Human Rights (Enforcement)Act, 2019.”
On February 28, 2021, the Director of Public Prosecutions (DPP) had claimed that Mr Akanga and Mr Kalema had stolen $410,000 (Shs1.6b) from a South Sudanese national who, according to court records, was never named. The little the State could reveal about the victim is that he owns a company called GAK Express Co. Limited.
The South Sudanese national, according to court records, reported the case to Kawempe Police Station. The case was referred to the Police Flying Squad Unit, which moved to arrest the duo. The suspects were taken to the dreaded Special Investigations Unit (SIU) in Kireka, Wakiso District.
To further show just how connected the South Sudanese is, the suspects were later taken to the army headquarters in Mbuya, Kampala, after the Chieftaincy of Military Intelligence (CMI) picked interest in the matter.
“That on March 6, 2021, he was taken to CMI offices in Mbuya and taken to a room where four muscled men had assorted weapons, including guns, sticks, batons, metal bars, pliers, chains, ropes, and electric wires, among others,” Justice Gidudu picked lines from Mr Kalemba’s affidavit, adding, “He was undressed. He was severely beaten using the electric cables, hang on handcuffs up the ring as his legs were tied down and suspended in one position for a whole day as he was being beaten.”
Justice Gidudu proceeded to note thus: “The alleged torture was meant to compel [Mr Kalemba] to confess to the crime of stealing money on February 28, 2021. Because of torture, he suffered physical and mental anguish, including several ailments like acute stomach pain, swelling of legs, feet and arms and paralysis.”
Stashing money away
The case involving a South Sudanese national trying to recover money in the excess of $400,000 came hot on the heels of an eerily similar one that was mercifully free of torture. City socialite Charles Olimi, alias Sipapa, was remanded to Luzira prison along with his partner—Ms Shamira Rukia Nakiyemba, a designer—on charges of aggravated robbery.
As per court records, the South Sudan nationals—identified as Mr Jacob Arok Mul and Ms Mary Ateng—were robbed of $429,000 (Shs1.6b), two mobile phones, an iPhone, silver blue in colour valued at $3,200 (Shs12m), a Samsung phone, and a flat-screen TV (75 inches) valued at $4,000 (Shs15m). Other valuables that were robbed include an iPhone 11 Pro, dark green in colour valued at Shs800,000, a Dell laptop, a charger valued at $1,000 (Shs3.8m), an Apple Macbook Air laptop computer valued at Shs5m, and an iPhone valued at Shs5m.
The woes of Mr Akanga (a former URA customs officer), Mr Kalemba (a former URA driver) and Sipapa, whose employment status isn’t clear, have brought into sharp focus the trend of South Sudanese nationals opting to reject banks in preference for stashing rather huge sums of cash in their houses. This has consequently triggered money laundering allegations.
“There’s no law that I’m aware of that stops a person from having big sums of money in cash,” a lawyer whose specialty is in illicit financing, said on condition of anonymity such that he could speak freely. “But holding large amounts of cash may be evidence of involvement in illicit criminal activity.”
Police says there is no need for alarm over huge sums of money found with South Sudanese.
“The money is properly accounted for and those people can explain where they got it and how they are going to invest it,” Mr Fred Enanga, the police spokesperson, told Saturday Monitor this past workweek.
Justice Gidudu insists that a person who doesn’t trust the banking system in most cases is a money launderer.
“Money that’s laundered is not put in the bank because it can easily be seized by the Financial Intelligence Authority, Bank of Uganda, and so on,” he said, adding, “That’s why they keep money in their houses. They keep money in the pillow [cases]. That’s why you see house boys and house maids work with thieves to steal that money. They have to keep it under their beds and after they decide how to legitimise it by buying property—[they] buy cars, buy buildings and so on such that they clean the money.”
Money laundering haven
In a report titled ‘A Scoping Study of Illicit Financial Flows Impacting Uganda’, Global Financial Integrity (GFI)—a Washington, DC-based think tank that interests itself in illicit financial flows, corruption, illicit trade, and money laundering—says illicit financial flows (IFFs) are part of Uganda’s broader political economy dynamic.
GFI adds that the continued economic growth and development of Uganda are hampered by corruption, impunity, and an opaque extractive sector. The growth in Uganda’s economy, according to GFI, and its role as a haven for legal and illegal activities stemming from neighbouring countries like South Sudan, create headstrong opportunities for illicit financial flows.
“The central government has a decent capacity to combat these opportunities for IFFs on paper, but its willingness or capacity to act to curtail IFFs is lagging,” GFI said in the report, adding that trade misinvoicing is the most significant area of illicit financial flows in Uganda that can be estimated using publicly available data.
The report further notes thus: “From 2006 to 2015, the latest years for which the necessary data are available, potential trade misinvoicing amounted to roughly 18 percent of total Ugandan trade over the 10-year period. The figure for possible outflows is some 10 percent of total trade, and for possible inflows is around eight percent of total trade (2006-2015).” It adds: “Viewed in dollar terms, the potential over- and under-invoicing of imports from 2006-2015 were approximately $4.9b (Shs18.6 trillion), and over- and under-invoicing of exports may have reached $1.7b (Shs6.4 trillion).”
Joined at the hip
Despite being pegged back by conflicts, South Sudan remains one of the leading destinations for Uganda’s exports. Products such as cereals, maize, wheat flour, sugar, vegetable oils, beer, soft drinks, iron, steel, cement, and motor vehicle re-exports come out top.
Recent data from Uganda’s central bank, for instance, shows that Uganda‘s exports to South Sudan—which got independence in 2011—hit a monthly average of $50.6m (Shs193b) in February.
This means that South Sudan is a key cog in Uganda’s export revenues. Yet, just like Uganda, South Sudan is on the Financial Action Task Force’s (FATF) grey list. The list places a jurisdiction under increased monitoring after its expression of a commitment to swiftly address the identified strategic deficiencies in their Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) controls.
Due to institutional weaknesses that highlight illicit financial flows, South Sudan is ranked as a fragile State. It is, in fact, one of the most corrupt jurisdictions in the world as per various studies. Yet empirical evidence has shown that Uganda and its eastern neighbour Kenya have benefited the most from the mess. The two countries are the destinations or transit points of illicit financial flows from South Sudan.
It didn’t come as a surprise in 2018 when Ms Sigal Pearl Mandelker—then the US Under Secretary of the Treasury for Terrorism and Financial Intelligence—beseeched Uganda and Kenya to stop South Sudan political leaders from buying property in their jurisdictions using corruption proceeds.
“When it comes to South Sudan, Uganda is particularly important to us for obvious reasons. We also know that much of the open source reporting indicates that South Sudanese elites are hiding assets and buying property in Uganda,” Ms Mandelker revealed back then, adding, “So, our message to the government counterparts is that we want to work with you to stop the illicit financing”.
According to the Institute of Economic Affairs (IEA), a UK-based free-market think tank, illicit financial flows in South Sudan are manifested in the manipulation of the currency exchange control system.
“Most currency leaving South Sudan is in US dollars, which has given rise to a black-market system that manipulates the exchange rate to offer almost 400 percent of what is offered by the Bank of South Sudan,” the IEA said in its report titled “Why Reduction of Illicit Financial Flows that Fuels South Sudan’s War Economy is in Kenya and Uganda’s interest.”
Illicit flow of finances
South Sudan’s critical resources such as oil, wood, and metal ore are often shipped out of South Sudan illegally by the political class.
“The men who liberated South Sudan proceeded to hijack the country’s fledgling governing institutions, loot its resources,” The Sentry, a policy organisation that interests itself in inflows of dirty money connected to African warlords, observed, adding, “By the time South Sudan became the world’s newest State in 2011, a cabal of military and civilian officials had already captured its main government institutions enabled by a dizzying array of international actors seeking to profit from rapidly developing kleptocracy. Factions that had formed during the long war for independence now turned their attention to competing over the control of this new State, which was blessed with billions of dollars of annual oil revenue and no checks and balances or transparency.”
Just like other African countries, illicit flow of finances in South Sudan is also manifested in the mismanagement of government procurement and payment systems, with the IEA saying the country is infested with rampant abuse of procurement procedures thus creating loopholes for plunder of public resources.
“Risk of international downgrading due to noncompliance with local and international AML (anti money laundering) laws. This may lead to downgrading in the FAFT evaluation thus locking local banks from international financial infrastructure,” the IEA warned Uganda and Kenya of the ramifications of profiteering from South Sudan’s dirty money, adding, “Risks to the status of Kenya as an International Financial Centre due to complicity of state organs on dealing with IFFs (illicit financial flows) from South Sudan and protection of persons under watch list.”
Although it said it was running out of patience, the FATF restrained itself from putting Uganda onto a blacklist that currently has only North Korea and Iran. Uganda was given another bite at the cherry insofar as carrying out meaningful reforms is concerned.
Uganda, according to the FAFT, had failed in many ways such as seeking international cooperation in line with its risk profile, opaqueness in ownership of Ugandan companies, failure to implement a risk-based approach for supervision of the non-profit organisation (NPO) sector to prevent terrorism financing, inter-alia.
String of reforms
In response to the issues taised by the Financial Action Task Force (FATF), Kampala this month amended several laws to see that they meet the FAFT demands. For Instance, the Anti-Money Laundering Act was amended to include provisions that empower the Financial Intelligence Authority (FIA) to levy administrative penalties if they are found in breach of the Anti-Money Laundering Act. The FIA was instituted in 2013 by the government to monitor, investigate, and prevent money laundering in the country.
In response to FAFT queries that company ownership in Uganda is shrouded in mystery as owners of Ugandan companies can’t be traced, the Companies Act was amended to provide for the definition of beneficial ownership. The Act now also requires all companies to keep a register of beneficial users, which shall include all information prescribed in regulations relating to beneficial ownership, the role of the accountable persons, and offences and sanctions.
“The rationale is to comply with Recommendation 24 of the FATF, which requires countries to take measures aimed at preventing the misuse of legal persons for money laundering and terrorism financing,” the FIA said in a statement seen by the Saturday Monitor.
The Partnerships Act was also amended to provide for the definition of the beneficial owner, to provide for a register of beneficial owners, which shall contain particulars of beneficial owners. It shall also detail other related matters, including where the register is to be kept; giving notice to the registrar of the place where the register is to be kept; and empowering the minister to make regulations to prescribe additional reporting requirements to be complied with by a partnership with beneficial owners.
The Anti-Terrorism Act has been amended to provide for the offence of proliferation financing and for related matters. Proliferation financing, according to the Act, is defined as the act of providing funds or financial services, which are used—in whole or in part—for the manufacture, acquisition, possession, development, export, trans-shipment, brokering, transport, transfer, stockpiling or use of nuclear, chemical or biological weapons and their means of delivery and related materials.
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