May 13, 2022
Corporate Transparency: A guide for beneficial laws in Uganda.
Washington, DC — Corporate opacity presents a key vulnerability in the Ugandan economy, contributing to the UGX 2 trillion (US$550 million) in illicit financial flows (IFFs) lost each year, according to a joint report released by Global Financial Integrity (GFI) and Advocates Coalition for Development and Environment (ACODE).
“The ability to use anonymous companies enables criminals to conduct illegal activities, such as tax evasion, corruption, money laundering, and financing of terrorism, while staying out of the view of law enforcement authorities,” said Kaisa de Bel, Policy Analyst at GFI. “To increase transparency in business transactions and curtail IFFs, the Ugandan government should require companies to disclose beneficial ownership information, that is, reveal the identity of individuals who ultimately enjoy the benefits of an entity”.
In the new report, “Corporate Transparency: A guide for beneficial ownership laws in Uganda”, GFI and ACODE use a series of case examples where Ugandan and other African government officials used shell companies and offshore trusts to stash and hide their wealth to demonstrate how the failure to collect beneficial ownership information is frequently exploited by individuals looking for a convenient way to move illicit proceeds and conceal their criminal activity.
|View the GFI-ACODE report|
Uganda’s procurement body, The Public Procurement and Disposal of Public Assets Authority (PPDA), in December 2021 directed contractors bidding for government tenders to reveal the real owners. Benson Turamye, the PPDA Chief Executive, while discussing the importance of strengthening of monitoring compliance of procuring and disposing entities, said, “This will help the Government of Uganda to understand and know the persons it is dealing with for purposes of risk mitigation, curb corruption, fraud, and tax evasion, to achieve greater transparency.” This is not sufficient to curb corruption which is the main source of Illicit Financial Flows. As per the report, adopting a centralized register for all companies operating in Uganda will be the most effective to ensure transparency and accountability. A centralized Beneficial Ownership makes it easier for authorities to investigate and prevent the use of anonymous companies to hide proceeds of crime.
The Corporate Transparency Guide report recommends that beneficial ownership legislation covers all legal entities, including limited liability companies(LLCs), limited liability partnerships (LLPs), trusts and multinational companies operating in Uganda. “Beneficial ownership information will be instrumental in Uganda’s extractives sector where the mining sector has been subject to corporate secrecy severely undermining domestic revenue mobilization efforts, environmental protection and stifling economic growth,” said Onesmus Mugyenyi, Deputy Director at ACODE.
Collecting ID information will accurately identify the real individuals behind companies in Uganda, reducing procurement risks and corruption and ultimately curbing illicit financial flows. Additionally, the guide recommends verification and updating the beneficial ownership data. This will be key to improving the ability of government authorities and other users to trust and rely on the recorded data.
GFI and ACODE, in this report, advocate for the adoption of streamlined procedures, which are essential for economies as they implement new transparency policies. It provides specific recommendations for a stringent and comprehensive beneficial ownership legislation in Uganda that prevents loopholes for financial criminals to exploit. The two organizations will continue to coordinate with other civil society groups and key institutions to tackle the opacity of company ownership and curb illicit financial flows.
Global Financial Integrity (GFI) is a Washington, D.C.-based think tank, producing high-caliber analyses of illicit financial flows, advising governments on effective policy solutions, and promoting pragmatic transparency measures in the international financial system as a means to improve global development and security and reduce inequality.
Advocates Coalition for Development and Environment (ACODE) is an independent public policy research and advocacy Think Tank based in Uganda, working in the Eastern and Southern Africa Sub-regions on a wide range of public policy issues.