Africa-Press – Uganda. Thousands of businesses operations are at standstill after their accounts were blocked for what government officials say was noncompliance with laws on the prevention of money laundering and terrorism financing.
On November 30, commercial Banks, in line with a directive from Bank of Uganda, blocked accounts of companies that had not updated their the Beneficial Owners information – the only loophole keeping Uganda on the grey list of the Financial Action Task Force. FAFT is the global money laundering and terrorist financing watchdog.
Business owners, however, fault Uganda Registration Services Bureau (URSB), the statutory body that registers businesses, for an excruciatingly slow and complicated process required for the update.
On 11 January 2023, the Uganda Registration Services Bureau (URSB) issued a public notice requiring all companies and partnerships to update their beneficial owners’ information, following the enactment of The Companies (Amendment) Act 2022, which requires companies to keep a register of its final beneficiaries.
Parliament hurriedly passed the amendment in September, at the height of concerns that Uganda could slip onto the black list of the FAFT due to weak anti-money laundering and terrorism financing policies.
“Around March, Uganda was on the grey list on the FAFT for issues to do with money laundering for not having a Beneficial Owners Register. So amendments were made to the law to require companies to have a beneficial owners register. You are required to do a data update and file a Beneficial Owners Form, which is an actual record of the final beneficiaries in that company,” Mr Denis Nabende, the manager public relations at URSB said.
A travel and tours operator who spoke to this publication expressed how he was allegedly caught unawares when he went to his bank to withdraw cash only to be turned away. His attempts to make the crucial update he says has been nothing less of frustrating.
“My biggest problem is the time it takes. An answer can come in three days, which means an answer once a week, at most two. You go over and over, they do not ask for corrections at once,” they said.
“While we are doing all this, accounts are blocked. You cannot transact, cannot work, you are basically closed. I had to borrow from a money lender to run the transaction. Are they helping the private sector survive?” they added.
Similar complaints have surfaced of social media platform, X.
“One of these days, I am going to go to URSB and challenge the Director, Business registration to a duel,” one user shared.
“URSB can frustrate. One day the system is down. The next day they can’t link to the NIRA records to reflect IDs. Same time banks are freezing accounts. What shall Uganda do.” another posted.
Mr Wilbrod Owor, the Executive Director at the Uganda Bankers Association (UBA) confirmed suspension of accounts by commercial banks, calling on businesses to comply since the risks of being blacklisted would be dire for the country.
Responding to the delay concerns, Mr Nabende said businesses were given ample time, adding that only those cleared will have their accounts unblocked.
Mr Nabende says average submissions have hiked to 700 daily since accounts were frozen, signaling the number of businesses affected. This has also created traffic and backlog.
“We got a surge, a huge run on our system because accounts were closed and clients could no longer access their money. We started pushing in March but they did not comply. We receive an average of 700 applications a day. They will call you and say I have filed today and I want my thing today but our system deals with who submitted first,” Mr Nabende said
He further explained the form has about six levels, and may involve multiple queries to ensure a clean result.
“It is not something you just clear. It is a process that is strict, because if you mess up someone’s record and FATF audits and recognizes you have been passing things for the sake, then you go back to the grey list and we can’t risk for the country,” Mr Nabende said.
The Bureau says they have increased the number of registrars, and focused more manpower to speed up the processing of the submissions, committing to a turnaround time of two to three days, only stretching to five under very rare circumstances.
He also dispelled claims that businesses were not informed, saying they worked with the Financial Intelligence Authority, and the Uganda Bankers Association to conduct a series of training and awareness campaigns.
In a fix.
Implementation of the law now pits struggling businesses and the country’s race to avoid joining countries like Iran on the FAFT blacklist. Uganda has been on the grey list, which means substantial weaknesses in tackling financial crimes.
“An entrepreneur has to suffer with URSB, KCCA, URA, when do we have the time to concentrate on businesses. For us to get a tourist visa in Uganda, I can take a year of corresponding, convincing. You have to defend the country against so many things it is painful that the people who are supposed to help us seem not to understand that,” the affected tour operator said.
“My most pressing goal is to ensure that Uganda gets off the FATF grey list by February next year 2024. This is not an easy task…. We shall therefore, not only strive to meet AML/CFT international standards but also surpass them, thereby making our country a model of financial vigilance in the region,” Mr Samuel Were Wandera, Executive Director at the FIA is quoted on the Authority website
In August, the Financial Intelligence Authority revealed Uganda has only 40 percent of beneficial owner’s data, which is way below the required 80 percent.
Slipping onto the blacklist would spell trouble for the country including undermining the integrity of her financial markets.
Struck off companies
Business owners who were scrapped off the URSB register have also expressed dismay over the tedious process to get back on the list.
On its website, URSB posted a list of 110,822 companies that were struck off the list over failure to file annual returns.
“They woke up and scrapped companies from the list…after getting scrapped of the list, you will go there and they ask you to pay the arrears, write letters asking to get back,” an affected business owner said.
Mr Nabende explained that companies are required to annually update their details and pay Shs50,000. Only those that default for five years are struck off, and are given a grace period of one year to get their affairs in order, he added.
“We had to freeze services because compliance levels are still very low unless someone is affected. Our interest is to have a clean register. We are formalizing an informal economy,” he said.
Source: Monitor
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