MONEY LAUNDERING

Money-laundering refers to the illegal process of concealing the origin of money obtained illegally by passing it through complex sequence of banking transfers or commercial transactions, the overall scheme of this process returns the clean money to launderer in obscure and indirect way.

The Anti-Money Laundering Act of 2013, defines money laundering as the process of turning the illegitimately obtained property into seemingly legitimate property and it includes concealing or disguising the nature, source, location, disposition or movement of the proceeds of crime and any

activity which constitutes a crime under section 116 of this Act.

It therefore involves the illegal process of making large amounts of money generated by criminal activity such as drug trafficking or terrorist funding, arms trafficking to mention a few appear to have come from a legitimate source. It disguises the money from the illegal source look legal.

Money launderers confuse where the money comes from, there is always unnecessary secrecy and the launderer cannot explain the clearly the source of money. Criminals pursue two goals while laundering money. The first goal is to away from the premise crime committed by concealing the source of funding through a series of transactions and any other tricks, and the second goal is to is to prevent confiscation of this money and use this money comfortably.

The Anti-Money Laundering Act makes it a crime for a person to engage in any monetary transaction in an amount of money greater than$10,000 knowing that the money was obtained through criminal activity.

The money from a criminal activity is considered dirty and the process launders it to make it look clean. Under the Anti- Money Laundering Act 2013, it is a crime to involve yourself in any proceeds of crime as seen in section 3

‘’is prohibited for any person to intentionally—

(a) convert, transfer, transport or transmit property, knowing or suspecting that such property to be the proceeds of crime, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of the crime generating the proceeds to evade the legal consequences of his or her actions; or

(b) conceal, disguise or impede the establishment of the true nature, source, location, disposition, movement or ownership of or rights with respect to property, knowing or suspecting that such property to be the proceeds of crime; or

(c) acquire, possess, use or administer property, knowing, at the time of receipt, that the property is the proceeds of crime; or

(d) act to avoid the transaction reporting requirements provided in Part III of this Act; or’’

 

Ways through which money laundering is done:

Historically, methods of money laundering have included among others, smurfing or structuring of banking large amounts of money into multiple small transactions often spread out over many different accounts to avoid detection, use of currency exchanges, wired transfers and mules or cash smugglers to move money across boarders. Other methods involve investing in mobile commodities such as gems and gold that can easily be moved to other jurisdiction, discretely investing in and selling valuable assets such as real estate, counterfeiting and creating shell companies.

 

However, money laundering involves three basic steps to disguise the source of illegally earned money and make it usable.  The following are the steps/ways for laundering money: 

Placement:

This is where money is introduced into the financial system usually by banking it into different deposits and investments.

Placement usually comes under the following forms:

·         Cash business; this involves adding the cash gained from crime to the legitimate takings. This works best in businesses with little or no variable costs such as car parks, casinos, clubs, etc.

·         False invoicing; it involves putting through dummy invoices to match cash lodged, making it look like payment in settlement of the false invoice.

·         Smurfing; lodging small amounts of money below the AML reporting threshold to bank acconts or credit cards then using these to pay expenses. 

·         Foreign bank accounts physically taking small amounts of cash abroad below the customers’ declaration threshold, lodging in foreign bank accounts then sending back to the country of origin

·         Aborted transactions; funds are lodged with a lawyer or accountant to hold in their clients account to settle a proposed transaction. After a short time, the transaction is aborted. Funds are repaid to the client from an unimpeachable source.

Layering:

This involves concealing the source of money through a series of transactions and book keeping tricks.

Money is shuffled around to create a distance between it and the perpetrators.

Once this money enters the financial system, effort is done to conceal its illegal nature and make it difficult to identify its source.

 

Integration or Extraction:

This is the final stage which involves getting the money out so it can be used without attracting attention from law enforcement or tax authorities.

Money is then brought back to perpetrators as legitimate income or clean money. In this regard, the money laundered is withdrawn from the legitimate account to be used for whatever purpose criminals have in mind.

Money can be got in form of;

·         Loans to directors or shareholders which will never be repaid

·         Dividends paid to shareholders of companies controlled by criminals

·         Payments to fake employees in a way of getting the money back, usually paid cash and collected

Anti Money laundering legislation in curbing the evil of money laundering:

Government of Uganda has come up with efforts to combat money laundering in recent decades, the regulations that require financial institutions to put systems in place to detect and report suspicious activity.

The Anti-Money Laundering legal frame work with respect to Anti-Money Laundering preventive measures in Uganda is made up of three legislations that is Anti-Money Laundering Act, Financial Institution Act (covering only money laundering) and the Anti-Terrorism Act. The Anti-money laundering preventive measures as provided under the Anti-Money laundering act are largely consistent with Financial Action Task Force standards.

 

When the Anti-Money Laundering Act was enacted in 2013 it came up with a comprehensive structure on strategies and measures to combat money laundering. These include the following:

 

·         Making money laundering a crime; In fighting money laundering as it was a menace to both political and economic stability of the country, Uganda made it a serious offence and with penalty under the Anti-Money laundering Act of2013

 

·         Also the banks should monitor the flow of money especially to be vigilant on all the bank accounts with international money transfer on frequent basis and those accounts that pool the money from different sources.

 

·         Accountable persons are charged with undertaking the measures aiming at combating money laundering.

According to Anti-money laundering Act of 2013, in regulating and combating money laundering, accountants are made accountable persons.

The list of Accountable Persons under the Second Schedule to the Act is rather extensive and includes Advocates, Notaries, Accountants, Trustees, Casinos, Real Estate Agents, Financial Institutions, Insurance companies, Registrars of Land, among others.

 

·         Account/s should be maintained in the true names of account holder, an accountable person should maintain accounts in the true names of the account holder and should not open or keep anonymous accounts which are in fictitious or incorrect names; should not initiate a business relationship or carry out an occasional transaction without under taking customer due diligence measures to verify the identity of the client.

 

·         Records should be maintained for 10 years The accountable person shall establish and maintain records of the customers' identity and business transactions for at least ten years. These records should be used to enable the reconstruction of transactions where need be  including the dates, amounts involved, types of currency involved, parties to the transaction and their addresses, accounts involved, nature of the transaction, manner in which the identity of the client and the person acting on behalf the client was established, the name of the person who obtained the information, and the documents obtained to verify identity. Such records should be kept in such ways that any review, examination or investigations can be carried out effectively and efficiently by auditors or any other interested person

As laid down in S.11 Anti-Money Laundering Act, the records should be made available to the authorities as and when necessary.

 

·         Attention to complex, unusual and large transactions, Accountable person should pay special attention to all complex, unusual or large transactions which have no apparent economic or lawful purpose, where the identity of the parties involved has not been established, or the respondent jurisdiction does not have adequate systems to prevent money laundering. Save for communications between an advocate and a client, obligations of confidentiality, under S.14 are not an impediment to obligations as laid down under the law.