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Launderers outwit financial intelligence system with invisible transactions

Launderers outwit financial intelligence system with invisible transactions

by Kudzai Chinoda -
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Launderers outwit financial intelligence system with invisible transactions

The Independent July 2, 2019

Kampala, Uganda | THE INDEPENDENT | The Financial Intelligence Authority (FIA) says it is registering more entities to report cases of money laundering because launderers are now opting for non-traceable transactions.

The authority recently announced that car dealers would be required to register with it, in a move to curb laundering in the business. In addition, the authority is targeting persons involved in trading with crypto-currencies.

The Anti-Money Laundering Act, 2013 mandates the authority to register all accountable persons who are then obliged to submit reports on their transactions, and cases of suspected money laundering and terror financing.

FIA Executive Director Sydney Asubo says trends are changing as more launderers avoid the official banking system which will, in most cases, avoid suspicious funds. Asubo says there is an increase in the number of untraceable money transfer channels, complicating the fight against money laundering.

He cites the Hawala system as one of the channels that are increasingly being used by launders to beat the financial intelligence network.

Hawala is an illegal foreign exchange market where trading of currency happens outside the parallel controlled financial channels.

The Hawala system works with a network of operators through whom, a person willing to transfer money can channel their remittance without going through the formal banking system. A dealer from one country, just contacts a counterpart from the receiving end, to hand over cash to the intended recipient.

The system is done via informal agreements with no requirements to go through the banks or even cross borders as long as the two parties can be trusted.  Asubo says that hundreds of sales agreements are concluded every day without using the conventional banks, a move that requires that the financial intelligence network also revisits its approach.

Asubo also says there are lapses in checks in money laundering as some of them do not have the facilities to detect cases.

Meanwhile, Asubo says they are currently working on a framework to regulate cryptocurrencies in Uganda. He says the framework will allow the entity to capture the details of the cryptocurrency dealers, understanding them and asking them to register. He says their beginning point is to get to know individuals dealing with cryptocurrency.

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