FATF AML Deficiency List
Non - Compliance with FATF MER Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Weakness in Government Legislation to combat Money Laundering
Uganda is on the FATF List of Countries that have been identified as having strategic AML deficiencies.
FATF Statement re AML Strategic Deficiencies: 25 February 2021
Since February 2020, when Uganda made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime, Uganda has taken some steps towards improving its AML/CFT regime, including by adopting the National AML/CFT Strategy in September 2020. Uganda should continue to work to implement its action plan to address its strategic deficiencies, including by: (1) seeking international cooperation in line with the country’s risk profile; (2) developing and implementing risk-based supervision to FIs and DNFBPs; (3) ensuring that competent authorities have timely access to accurate basic and beneficial ownership information for legal entities; (4) demonstrating LEAs and judicial authorities apply the ML offence consistent with the identified risks; (5) establishing and implementing policies and procedures for identifying, tracing, seizing and confiscating proceeds and instrumentalities of crime; (6) demonstrating that LEAs conduct TF investigations and pursue prosecutions commensurate with Uganda’s TF risk profile; (7) addressing the technical deficiencies in the legal framework to implement PF-related TFS and implementing a risk based approach for supervision of its NPO sector to prevent abuse of the sector. The FATF is monitoring Uganda’s oversight of the NPO sector. Uganda is urged to apply the risk-based approach to supervision of NPOs in line with the FATF Standards.
Compliance with FATF Recommendations
The last follow-up to the Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Uganda was undertaken in 2020. According to that Evaluation, Uganda was deemed Compliant for 14 and Largely Compliant for 5 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 0 of the Effectiveness & Technical Compliance ratings.
US Department of State Money Laundering assessment (INCSR)
Uganda was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -
Uganda’s banking and financial sectors are growing in size and sophistication. The country has a total of 25 commercial banks, 84 percent of which are foreign-owned, and more than 300 non- bank financial institutions. Only 20 percent of Ugandans have deposits in the formal banking sector, with the rest of the populace relying on cash transactions or alternative forms of banking. Money transfers and payments through mobile phones (M-payments), for instance, have become key providers of basic, if informal, financial services for low-income earners who cannot afford the charges levied by the formal banking system. M-payments provide needed financial services to Uganda’s unbanked population, much of which lives in remote areas of the country. Annual remittances are one of Uganda’s largest sources of foreign currency.
Uganda’s cash-based informal economy provides a fertile environment for money laundering. Its lack of intellectual property rights legislation feeds a large black market for smuggled and/or counterfeit goods. Currently, most laundered money comes from domestic proceeds, much of which stems from unchecked corruption. Real estate and casino operations are of particular concern. Uganda’s inability to monitor formal and informal financial transactions, particularly informal trade along porous borders with South Sudan, Kenya, Tanzania, and the Democratic Republic of Congo, could render Uganda vulnerable to more advanced money laundering activities and potential terrorist financing. Uganda’s black market takes advantage of these borders and the lack of customs and tax collection enforcement capacity.
There are no international sanctions currently in force against this country.
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 27
World Governance Indicator – Control of Corruption 12
Corruption constitutes a major challenge for businesses operating or planning to invest in Uganda. The police, the judiciary and procurement are areas where corruption risks are very high and under-the-table cash payments are expected. The core of Uganda's legal anti-corruption framework is the Anti-Corruption Act, the Penal Code, the Inspectorate of Government Act 2002, the Public Finance Management Act 2015 and the Leadership Code Act 2002 (LCA). The Penal Code provides instruments to deal with various corruption offenses including embezzlement, causing financial loss, abuse of office and fraud. The LCA is designed to increase transparency and to curb corruption among senior public officials; it also criminalizes attempted corruption, active and passive bribery, extortion, bribery of a foreign public official and abuse of office. Under the LCA, gifts or donations must be declared if they exceed five currency points in value. Corruption challenges are exacerbated by weak law enforcement, which fuels a culture of impunity. There is no distinction between a bribe and a facilitation payment under Ugandan law. For further information - GAN Integrity Business Anti-Corruption Portal
Uganda has substantial natural resources, including fertile soils, regular rainfall, small deposits of copper, gold, and other minerals, and recently discovered oil. Agriculture is the most important sector of the economy, employing one third of the work force. Coffee accounts for the bulk of export revenues. Uganda’s economy remains predominantly agricultural with a small industrial sector that is dependent on imported inputs like oil and equipment. Overall productivity is hampered by a number of supply-side constraints, including underinvestment in an agricultural sector that continues to rely on rudimentary technology.
Industrial growth is impeded by high-costs due to poor infrastructure, low levels of private investment, and the depreciation of the Ugandan shilling.
Since 1986, the government - with the support of foreign countries and international agencies - has acted to rehabilitate and stabilize the economy by undertaking currency reform, raising producer prices on export crops, increasing prices of petroleum products, and improving civil service wages. The policy changes are especially aimed at dampening inflation while encouraging foreign investment to boost production and export earnings. Since 1990 economic reforms ushered in an era of solid economic growth based on continued investment in infrastructure, improved incentives for production and exports, lower inflation, better domestic security, and the return of exiled Indian-Ugandan entrepreneurs.
The global economic downturn in 2008 hurt Uganda's exports; however, Uganda's GDP growth has largely recovered due to past reforms and a rapidly growing urban consumer population. Oil revenues and taxes are expected to become a larger source of government funding as production starts in the next five to 10 years. However, lower oil prices since 2014 and protracted negotiations and legal disputes between the Ugandan government and oil companies may prove a stumbling block to further exploration and development.
Uganda faces many challenges. Instability in South Sudan has led to a sharp increase in Sudanese refugees and is disrupting Uganda's main export market. High energy costs, inadequate transportation and energy infrastructure, insufficient budgetary discipline, and corruption inhibit economic development and investor confidence. During 2015 the Uganda shilling depreciated 22% against the dollar, and inflation rose from 3% to 9%, which led to the Bank of Uganda hiking interest rates from 11% to 17%. As a result, inflation remained below double digits; however, trade and capital-intensive industries were negatively impacted.
The budget for FY 2015/16 is dominated by energy and road infrastructure spending, while relying on donor support for long-term economic drivers of growth, including agriculture, health, and education. The largest infrastructure projects are externally financed through low-interest concessional loans. As a result, debt servicing for these loans is expected to rise in 2016/2017 by 22% and consume 15% the domestic budget.
Agriculture - products:
coffee, tea, cotton, tobacco, cassava (manioc, tapioca), potatoes, corn, millet, pulses, cut flowers; beef, goat meat, milk, poultry, and fish
sugar, brewing, tobacco, cotton textiles; cement, steel production
Exports - commodities:
coffee, fish and fish products, tea, cotton, flowers, horticultural products; gold
Exports - partners:
Rwanda 10.7%, UAE 9.9%, Democratic Republic of the Congo 9.8%, Kenya 9.7%, Italy 5.8%, Netherlands 4.8%, Germany 4.7%, China 4.1% (2015)
Imports - commodities:
capital equipment, vehicles, petroleum, medical supplies; cereals
Imports - partners:
Kenya 16.4%, UAE 15.5%, India 13.4%, China 13.1% (2015)
Investment Climate - US State Department
Uganda offers investors numerous opportunities, given its youthful, English-speaking population, open markets, and abundant resources, Uganda’s economy expanded six percent per year over the past decade, due to rapid growth in the energy, construction, infrastructure, telecommunications and financial services sectors. While Uganda maintains a liberal trade and foreign exchange regime, and largely adheres to IMF/World Bank programs to fight poverty, continuing reports of endemic corruption, financial mismanagement, and increasing political repression raise questions about the government’s commitment to fostering an investor-friendly environment. National elections held on February 18, 2016 fell short of international standards, according to most international and domestic election observer missions. Projects managed by the Government of Uganda are hampered by a sluggish bureaucracy with a non-transparent decision-making process.
Poor infrastructure, high energy and production costs, and a number of macro-economic challenges, most notably a large trade deficit, inflation, and high interest rates, dampened growth in 2015, but growth is expected to rebound to five percent in 2016, and 5.5 percent in 2017. With a trade deficit exceeding $2 billion, the Ugandan shilling remains under pressure. Uganda’s Central Bank, the Bank of Uganda (BOU), is widely credited with pursuing sound monetary policy that helped arrest the shilling’s rapid depreciation which totaled 30 percent in the first three quarters of 2015. The BOU targeted inflation, raising the central bank rate (CBR) to 17 percent in September 2015. The BOU recently dropped the CBR to 16 percent in a sign that it believes inflation is under control at 6.2 percent, just above the BOU’s target of five percent.
Agriculture plays a dominant role in Uganda’s economy, employing 72 percent of Uganda’s workforce. In 2014 agriculture contributed 24.7 percent of GDP. Uganda’s top agriculture exports include: coffee, tea, tobacco and cotton. Uganda is Africa’s largest exporter of coffee, producing about 3.8 million bags of coffee in 2014. Other significant agricultural exports include fish, flowers and horticultural produce. Agricultural inputs such as seeds, fertilizers, herbicides, and agricultural processing equipment remain in short supply for Ugandan farmers, impeding growth in the sector.
Uganda’s natural resources are plentiful, including significant oil reserves - an estimated 6.5 billion barrels, including 1.4 billion which are recoverable. With only 40 percent of the oil-rich areas explored, additional discoveries could boost Uganda’s oil reserves and the Ministry of Energy plans to award additional exploration licenses in 2016. In February 2015, the Ministry of Energy also provisionally awarded a multi-billion dollar contract to construct a refinery to Russian firm RT Global, subject to final negotiations. In spite of these developments, two of the three oil companies active in Uganda are downsizing their operations as delays in issuing production licenses mount. Moreover, details of an export pipeline from western Uganda to the Indian Ocean through Kenya or Tanzania are still being negotiated. Based on current projections, it is unlikely that any production could realistically begin before 2020 at the earliest.
Inadequate and unreliable power supply remains one of the largest obstacles to private sector investment, and Uganda’s electricity network urgently needs renovation and expansion. Access to electricity countrywide is a meager 20 percent and falls to 10 percent in rural areas. The Government formally broke ground on the 600-megawatt Karuma hydropower project in 2013, but the project continues to be dogged by delays, and the first 100 megawatt turbine is not expected to be operational until 2018 at the earliest. In the meantime, Uganda is working to expand its power supply by constructing a number of micro-hydro projects along the Nile River and is promoting the development of other sources of renewable energy, such as off-grid solar power systems. The government continues to explore options to develop its geothermal reserves in western Uganda.
High transportation costs are another constraint on Uganda's economy. Uganda’s dilapidated road and bridge infrastructure needs considerable investment, its railway system is in disrepair, and air freight charges are among the highest in the region A two-lane highway from Kenya remains the primary route for 80 percent of Uganda's imports, making transportation slow, costly and susceptible to disruption. Another problem is Uganda’s reliance on imports from Kenya’s Mombasa seaport. While Uganda and Kenya have worked to remove non-tariff barriers, resulting in quicker transit times, chronic congestion at Mombasa results in costly delays. Uganda also hopes to shift more cargo transit from trucking to rail but extensive and expensive rehabilitation of existing rail lines is required before freight trains can service Uganda. In March 2015, the government signed a contract with China Harbor Engineering Company Ltd to build a USD 3.2 billion standard gauge railway project to improve rail infrastructure through the east-African region; it is projected for completion in December 2017. Passenger traffic through Uganda's Entebbe International Airport grew 7 percent in 2015. The government pulled privately-owned Air Uganda’s license in 2014; however, the government is looking to revive another carrier as a public-private partnership.
At 3.0 percent per year, Uganda's population growth rate is one of the fastest in the world, and its current total population of 34.9 million is expected to rise to 54 million by 2025. While creating potential markets for products, the country's population growth is also increasing the strain on social services, underfunded schools and hospitals, infrastructure, forests, water, and land resources. The high level of HIV/AIDS infection in the country is also taxing social services. Uganda developed a model program to combat HIV/AIDS, and prevalence rates decreased from close to 20 percent in the 1990s to 6.4 percent in 2006. However, the current published national HIV/AIDS prevalence rate is 7.3 percent according to the 2011 AIDS Indicator Survey.
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