Anti-Money Laundering and Combating the Financing of Terrorism in Uganda

Amendments on “beneficial ownership” to combat money laundering and financing of terrorism in Uganda

Introduction

In 2016, the Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) Mutual Evaluation Report (MER) was adopted by Uganda. The MER highlighted several areas Uganda needed to address in its AML/CFT legal and regulatory framework for it to be considered compliant with the Financial Action Task Force (FATF)recommendations. In particular, the FAFT recommendations 24 and 25 require Uganda to enact provisions to strengthen and implement the system of sanctions for violations of beneficial ownership transparency obligations for legal arrangements. Further, Uganda is required to undertake robust legal reforms to address deficiencies in the existing legal framework on beneficial ownership information of legal persons and arrangements for partnerships.

On that premise, on August 23, 2022, Uganda tabled before Parliament several new Bills for legal persons and partnerships in compliance with the MER recommendations. The Bills tabled included the Companies(Amendment) Bill, 2022; The Partnership(Amendment) Bill, 2022; The Trustees Incorporation (Amendment) Bill, 2022;The Anti-Money Laundering (Amendment) Bill, 2022; The Cooperative Societies (Amendment) Bill, 2022, and The Anti-Terrorism (Amendment) Bill, 2022. The Bills have since been passed by the Parliament with amendments and are expected to be assented to by the President.

Proposed provisions in the 2022 Amendment Bills.

The Bills introduce new provisions meant to combat financing of terrorism and these include the following.

Provisions on the beneficial owner

This provisions on the beneficial owner cuts across the 2022 amendment Bills on companies, partnership, trustees’ incorporation and cooperatives societies’ legislation.

The amendment Bills amend the several pieces of legislation to provide for the definition of a beneficial owner. The amendments require legal bodies (companies, partnerships, trusts, and cooperatives) to provide for a register of beneficial owners that shall contain particulars of beneficial owners such as names, postal address, identification particulars (NIN), nature of beneficial ownership and other related matters.

A “beneficial owner” under the Bills is defined as a natural person who has ultimate or final ownership or control of the entity (company, partnership, cooperative or trust) or a natural person on whose behalf a transaction is conducted in an entity, and includes a natural person who exercises absolute control over an entity.

The Bills propose that the register of beneficial owners shall be kept at the registered offices of the entity and the entity shall send notice to the Registrar of the place where its register of beneficial owners is kept and of any change of place within fourteen days after creating the register or changing the place where the register is kept.

Provisions on other financial measures

The Anti-Money Laundering (Amendment) Bill, 2022 amends section6A of the Anti-Money Laundering Act,2013 to require accountable person to take appropriate steps to identify, assess and monitor its money laundering, terrorism financing and proliferation financing risks. Further, the Bill seeks to empower the Financial Intelligence Authority and supervisory authorities to levy administrative penalties for breach of the provisions of the Act.

The Anti-Terrorism (Amendment) Bill, 2022 seeks to address Recommendation 7 of the FATF Recommendations which requires countries to implement targeted financial sanctions to comply with the UN Security Council Resolutions relating to the prevention, suppression, and disruption of proliferation of weapons of mass destruction and its financing. As such, the Amendment Bill seeks to create a new offence of proliferation financing, where a person or organisation (a) makes available an asset; (b) provides a financial service; or (c) conducts a financial transaction in the knowledge, or in recklessness, that the asset, financial service or financial transaction is intended, in whole or in part, to facilitate any of the activities that constitute proliferation financing.

Concluding Observations

The amending provisions of the Bills, once enacted, shall require persons who own or control a company, partnership, trust or cooperative or persons who receive benefits from trans-actions from such entities to offer information about themselves to be recorded in the register of beneficial owners when making any transactions with the listed entities.

The principle of beneficial owner—and the legal requirement of a register—is not uniquely new in its introduction in Uganda’s law. Faced with a similar MER from the FAFT in late 2016 on the need to enhance transparency of beneficial ownership of legal persons, Singapore amended its companies and limited liability partnerships laws in early 2017 requiring local and foreign entities to maintain a “register of controllers” (ROC). In Africa, in 2019, Kenya amended its Companies Act, 2015(under the Statute Law (Miscellaneous Amendments)Act 2019) to introduce section 93A to require companies to keep registers of beneficial owners while Tanzania issued the Companies (Beneficial Ownership) Regulations, 2019 under its Companies Act, Cap 212. On the other hand, countries with newly enacted companies’ laws have provided for beneficial ownership—including the disclosure thresholds based on risk, sectors, and politically exposed persons (PEPs)—this is the case under Ghana’s Companies Act, 2019 and Nigeria’s Companies and Allied Matters Act, 2020.

Therefore, if passed, the amendments would introduce new requirements by legal bodies in Uganda namely companies, trusts, cooperatives and partnerships to ensure and strengthen beneficial ownership transparency in Uganda.

Download this Legal Alert as a PDF file here

Disclaimer

No information contained in this alert should be construed as legal advice from ALP East Africa or ALP Advocates or the individual authors, nor is it intended to be a substitute for legal counsel on any subject matter.

For additional information in relation to this alert, please contact the following:

  • Fiona Latigi Lamaro

          Associate, Regulatory & Compliance Department

          flatigi@alp-ea.com

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