Issue 719 - Page 14

News ANALysis

Corporate transparency Experts release a guide for beneficial laws in Uganda

By Independent Reporter

Corporate opacity presents a key vulnerability in the Ugandan economy , contributing to the Shs2 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 ”.
Leaks such as the Pandora and Paradise Papers have exposed how Ugandan and other African government officials used shell companies and offshore trusts to stash and hide wealth identified by financial institutions as high risk .
According to GFI and ACODE , these and many other case examples demonstrate how the failure to collect beneficial ownership information is frequently exploited by individuals looking for a convenient way to move illicit proceeds and hide their criminal activity .
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 .
In one case , in 2017 , several employees of Stanbic Bank ( U ) Ltd used inside information to buy out a mortgaged property that a client was defaulting on .
It started when the bank extended a loan facility of Shs1.06 billion ( US $ 294,000 ) to enhance the working capital of MacDowel Foods and Beverages Ltd ; a company in the business of bread , pastry , and cake manufacture .
The loan was secured by mortgaging several plots of land in Kampala . The company subsequently failed to pay back this loan and in 2019 the bank sought to dispose of the mortgaged properties . The company reached an arrangement with the bank through a consent judgement but again defaulted on the consent judgment .
Not much later , the property was acquired by another company , Myriad Investment Club Ltd at the low price of Shs1 billion ( US $ 277,000 ), even though valuation reports showed a much higher market price of Shs4 billion ( US $ 1.1 million ).
It later turned out that Myriad Investment Club Ltd . had been opportunistically incorporated in 2020 as a shell company by seven employees of Stanbic Bank to purchase the
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