Report Highlights Real Estate, Mining, and Fisheries as High-Risk Sectors for Money Laundering

A recent four-year public inquiry has revealed that real estate, mining/extraction, and fisheries have become magnets for money laundering activities. The Finance Intelligence Authority (FIA) conducted a risk assessment, released last Friday, which also emphasized the susceptibility of digital representations of value to abuse by money launderers.

The report underscored that financial services involving the acceptance of monetary instruments are appealing to rogue elements engaged in money laundering. The study, conducted from April 2017 to June 2021, marked the second risk assessment undertaken in the country.

Despite efforts to combat money laundering and terrorism financing, Uganda remains on the Financial Action Task Force’s (FATF) grey list. The FATF has warned that Uganda could potentially be blacklisted, placing it alongside Myanmar, Iran, and North Korea, if insufficient progress is not made by October 2023.

The comprehensive sectorial threat assessment in the FIA’s report identified specific areas vulnerable to money laundering activities. The assessment gauged the exposure of accountable entities operating within financial and non-financial sectors to the proceeds of crime and money laundering.

The report pinpointed banks, money service businesses, real estate, casinos, and dealers in precious stones and metals as sectors commonly exploited by criminals to launder the proceeds of their illicit activities. In particular, real estate was found to be a platform for laundering significant amounts of ill-gotten funds from corruption, embezzlement, fraud, and tax crimes. Weak and outdated laws have been implicated in facilitating money laundering in the property sector.

The 2017 risk assessment had lowered the money laundering threat level for Uganda from high to medium-high due to reforms, but the FIA indicated that further work is needed, including amending and enacting laws in line with international standards.

The study indicated that while the securities and insurance sectors had been spared money laundering and terrorism financing schemes, lawyers, dealers in precious stones, and real estate agents faced vulnerabilities. Lawyers, viewed as gatekeepers, could inadvertently facilitate illicit funds into the financial system, prompting the need for their activities to be regulated.

Real estate agents, lacking regulation, were flagged as vulnerable to money laundering due to inherent risks within the sector. The report suggested that cross-border trading of precious stones and metals, often unlicensed and unrecorded, presented a challenge in combating money laundering.

External exposure was also noted concerning imports from countries such as the United Arab Emirates, Kenya, South Sudan, and the Democratic Republic of the Congo, accounting for a significant portion of Uganda’s exports and posing money laundering risks through inflow of export earnings.

Despite having a comprehensive legal framework aligned with international standards, Uganda’s vulnerability to money laundering persists due to weaknesses in regulatory bodies and existing frameworks. The FIA remains confident that the anti-money laundering controls in place will prevent Uganda from being blacklisted by the FATF. The report also highlighted a high threat of cybercrime-related money laundering, emphasizing e-mail and website scams as major conduits for financial losses.

Source: 2023 National Risk Assessment report