Issue 719 - Page 15

properties mortgaged with the Bank , dealing on their inside information that the bank ’ s client , MacDowel , had defaulted on their mortgages .
Myriad Investment Club was formed for the sole purpose of purchasing these properties and to defeat the Mortgage Act , which prohibits the lender , its agents and employees , their family members or another person in position of any other privileged information with regard to the transaction , to purchase mortgaged property or land without permission of the court . MacDowel Foods and Beverages Ltd . sued the Bank and Myriad Investment Club Ltd to recover the properties .
If it had been mandatory for legal persons in Uganda to file BO details , the beneficial owners of Myriad Investment Club Ltd could not have hidden behind the secrecy cloak of a company to buy mortgaged property from its employer . It would also have been easier for the bank to determine from the central registry and know that it was dealing with its own employees disguising under Myriad Investment Club Ltd .
No laws yet
Uganda does not currently have a BO law that requires companies to proactively record and register their beneficial owners in a central registry .
The main laws that cover BO are the AML Act 2013 , and the Mining Act , 2003 , which will be overhauled by the Mining and Minerals Act . Under the AML Act , certain ‘ accountable persons ’, such as financial institutions and legal professionals , are required to collect BO information from their clients as part of their Customer Due Diligence ( CDD ) obligations . However , this information is held by these accountable persons themselves . Uganda does not have a BO registry at present .
Although the Mining and Minerals Act will require the Minister for Minerals to establish a public registry for companies operating in the extractives sector , this will not cover companies operating in other sectors , where the risks of illicit financial flows are equally significant .
According to GFI and ACODE , as the Myriad Investment Club was incorporated for the purpose of acquiring real property , this case proves that it is equally important to identify beneficial owners of a company created for purposes of holding assets rather than doing business .
In another case , in 2013 , EUTAW Construction Company Inc ., a Ugandan company that claimed to be the subsidiary of an identically named construction company based in Mississippi , United States , was awarded a contract worth UGX 165 billion ( US $ 63.5 million ) by the Uganda National Roads Authority ( UNRA ) to construct a 74 km Mukono-Katosi / Kisoga-Nyenga road . The company subsequently subcontracted the work to CICO Construction Corporation , a Chinese company , and work commenced in 2014 . It later turned out that the Ugandan subsidiary company was in reality a shell company that did not exist . Both the tender documents that supported the bid , as well as the insurance bond that was used to allow for an advance payment to the company amounting to Shs24.7 billion ( US $ 9.5 million ), had been forged .
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 centralised register for all companies operating in Uganda will be the most effective to ensure transparency and accountability . A centralised 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
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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 stringent and comprehensive beneficial ownership legislation in Uganda that prevents loopholes for financial criminals to exploit .
The two organisations 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 .
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