Understanding illicit financial flows in and out of Uganda

Abstract

Africa has encountered illicit financial flows of about $84billion that have already been lost annually. By 2022, Uganda had lost about UGX 2 trillion (US$558,685,400) annually, a figure expected to worsen once commercial production of oil begins. The major argument is that the existing institutional framework coupled with the clandestine political elite activities greatly drive illicit financial flows despite less empirical studies on illicit financial flows in Uganda. The study sought an understanding of illicit financial flows in and out of Uganda. The target was answering questions related the key drivers of illicit financial flows; the role played by state elites involved in negotiation of investment deals with foreign investors in driving illicit financial flows and the effectiveness of institutions for fighting against illicit financial flows. Guided by the theory of embedded autonomy, an instrumental case study design together with a qualitative research approach were adopted and enabled the in-depth collection and analysis of data. The findings established that illicit financial flows in Uganda manifest in form of money laundering, corruption, cash smuggling, misinvoicing, tax evasion and avoidance. State elites have fuelled illicit financial flows through interfering with the work of the enforcement agencies to cover up criminals, corruption and failure to appropriate the required resources for the fight against illicit financial flows. However, the existing institutions such as the Uganda Financial Intelligence Authority, Bank of Uganda, Uganda Police Force and Uganda Revenue Authority derive mandate from the constitution of the Republic of Uganda 1995 as amended and their Acts of establishment to curb illicit financial flows. These include Anti Money Laundering Act 2013 and the Amendment Bill of 2022, URA Act 1991, Uganda Police Force Act 1994 as Amended and Communications Act 2013. These legal frameworks have effectively strengthened institutional operations against illicit financial flows despite a number of challenges encountered such as receiving policy guidelines from the line ministers who can easily be compromised by the state elite. Implications for this study are herein highlighted. Key Words: Illicit Financial Flows, State Elite, Money Laundering