aml/cft/cpf taskforce terrorism financing risk …

REPUBLIC OF UGANDA

AML/CFT/CPF TASKFORCE

TERRORISM FINANCING RISK ASSESSMENT

FOR THE NON-PROFIT ORGANISATIONS SECTORIN UGANDA

August 2021

TERRORISM FINANCING RISK ASSESSMENT2

TABLE OF CONTENTS

TABLE OF CONTENTS .......................................................................................................................

LIST OF ACRONYMS ..........................................................................................................................

DEFINITION OF TERMS ......................................................................................................................

ACKNOWLEDGEMENTS .....................................................................................................................

FOREWORD ..........................................................................................................................................

EXECUTIVE SUMMARY ......................................................................................................................

1. INTRODUCTION ..............................................................................................................................

2. METHODOLOGY .............................................................................................................................

3. CHALLENGES AND LIMITATIONS ...............................................................................................

4. THE NPO SECTOR IN UGANDA ...................................................................................................

Analysis of different Fatf NPO categories in Uganda ....................................................................

5. Non-Governmental Organizations (NGOs) ................................................................................

5.1. Nature and scope of the NGO Sector .........................................................................................

5.2. Legal and Institutional framework governing NGOs ..............................................................

5.3. Funding sources, Channels and Activities ................................................................................

5.4. TF Vulnerabilities in the NGO sector ..........................................................................................

6. COMMUNITY BASED ORGANISATIONS (CBOs) SECTOR IN UGANDA ...............................

6.1. Nature and scope of the CBO Sector ..........................................................................................

6.2. Legal and Institutional framework governing CBOs ..............................................................

6.3. TF Risk assessment for the CBOs ...............................................................................................

7. TRUSTS SECTOR IN UGANDA ......................................................................................................

7.1. Nature and scope of the Trusts Sector ........................................................................................

7.2. Legal and Institutional framework governing Trusts ...............................................................

7.3. TF Risk assessment for Trusts .......................................................................................................

8. FAITH BASED ORGANIZATIONS (FBO) IN UGANDA ...............................................................

8.1. Nature, scope and legal framework of the FBO Sector .........................................................

8.2. TF Risk assessment for the FBOs ...............................................................................................

9. CATEGORY OF NPOs AT RISK OF TF ABUSE ...........................................................................

10. KEY FINDINGS ...............................................................................................................................

11. RECOMMENDATIONS ...................................................................................................................

12. TERRORISM FINANCING RISK IN UGANDA BY NPO TYPE ..................................................

13. REFERENCES .................................................................................................................................

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FOR THE NON-PROFIT ORGANISATIONS SECTOR IN UGANDA 3

LIST OF ACRONYMS

ADF

AMLA

AML/CFT

ATA

BO

CBO

CID

CDD

CFT

CMI

CRS

DNMC

ESAAMLG

ESO

FATF

FATCA

FBO

FDLR

FIA

ISO

LRA

MER

ML

ML/TF

MoFPED

NGO

NIRA

NPO

NRA

OECD

OPM

PEPs

SNMC

STR

TF

Allied Democratic Forces

Anti-Money Laundering Act

Anti-Money Laundering/Countering the Financing of Terrorism

Anti-Terrorism Act

Beneficial Owner

Community Based Organization

Criminal Investigations Directorate

Customer Due Diligence

Countering /Combating the Financing of Terrorism

Chieftaincy of Military Intelligence

Common Reporting Standard

District Non-Governmental Organizations Monitoring Committee

Eastern and Southern Africa Anti-Money Laundering Group

External Security Organization

Financial Action Task Force

Foreign Account Tax Compliance Act

Faith Based Organization

Democratic Front for the Liberation of Rwanda

Financial Intelligence Authority

Internal Security Organization

Lord’s Resistance Army

Mutual Evaluation Report

Money Laundering

Money Laundering/Terrorist Financing

Ministry of Finance Planning and Economic Development

Non-Governmental Organization

National Identification and Registration Authority

Non-Profit Organization

National Risk Assessment

Organization for Economic Co-operation and Development

Office of the Prime Minister

Politically Exposed Persons

Subcounty Non-Governmental Organizations Monitoring Committee

Suspicious Transaction Report

Terrorist Financing


UBA

UNNR

UPF

URA

URSB

Uganda Bankers Association

Updated National NGO Register

Uganda Police Force

Uganda Revenue Authority

Uganda Registration Services Bureau


Consequence This refers to the impact or harm that ML or TF may cause, and includes the effect of the underlying criminal and terrorist activity on financial systems and institutions, as well as on the economy and society in general.

Mitigants These are actions or circumstances that reduce the overall risk level of a sector. These include law enforcement, supervision and the capacity to combat ML/TF.

FATF NPO A legal person or arrangement or organisation that primarily engages in raising or disbursing funds for purposes such as charitable, religious, cultural, educational, social or fraternal purposes, or for the carrying out of other types of “good works”.

Risk This is a function of threats, vulnerabilities and consequences, as mitigated by certain factors and circumstances.

Terrorism financing This is the financing of terrorist acts, and of terrorists and terrorist organizations. It entails a person or group of people with the potential to cause harm by raising, moving, storing or using funds and other assets (whether from legitimate or illegitimate sources) for terrorist purposes.

Threat This is a person or group of people, an object or activity with the potential to cause harm to the state, society, the economy etc. This includes criminals, terrorist groups and their facilitators, their funds, as well as past, present and future ML or TF activities.

Vulnerabilities When used in a risk assessment, this term comprises of those weaknesses that can be exploited by the threat or that may support or facilitate its activities.

DEFINITION OF TERMS


The National AML/CFT/CPF Taskforce expresses sincere thanks to the Ministry of Finance Planning and Economic Development (MoFPED), the Ministry of Internal Affairs, the National Bureau for Non-Governmental Organizations (NGO Bureau). Special thanks also go to members of the NPO sector who constituted the working group for this assessment in particular Chapter Four Uganda, Defenders Protection Initiative, Human Rights Network and to the 220 NPOs who participated in the interviews and responded to the questionnaires.

We are also indebted to the risk assessment Working Group which had representatives from the Financial Intelligence Authority, the National Bureau for Non- Governmental Organizations, the Uganda Police Force (UPF), Uganda Registration Services Bureau (URSB), Uganda Revenue Authority (URA), the NPOs, Uganda Bankers Association (UBA), MTN, Airtel, Chieftaincy of Military Intelligence (CMI), the Office of the Director of Public Prosecutions(ODPP), Internal Security Organization (ISO), External Security Organization (ESO) and Office of the Prime Minister (OPM).

ACKNOWLEDGEMENTS


FOREWORD


The assessment considered the different types of NPOs in Uganda as prescribed by the FATF namely; Non-Governmental Organizations (NGOs); Community Based Organizations (CBOs); Trusts; and Faith Based Organizations (FBOs).

The methodology used in the Risk Assessment for the NPO Sector was based on the FATF guidance, the World Bank NPO risk assessment tool and extensive consultation with public and private sector stakeholders using a structured questionnaire. The methodology combined qualitative, quantitative information, professional expertise, financial intelligence, classified security information, media and other publications to identify Terrorism Financing threats and vulnerabilities for the NPO Sector in Uganda.

The information obtained was analyzed with the aid of an assessment tool developed by the World Bank. The threat analysis considered the specific predicate offences of terrorism and terrorism financing, the terrorism financing trends and methods and proximity to active terrorist threat. The assessment focused on the available data from Law Enforcement Agencies regarding TF/terrorism convictions, prosecutions, investigations, intelligence, STRs and terrorism allegations in credible open sources.

This report examines in details how and why NPOs in Uganda could potentially be used to finance terrorists and terrorist activities. The report assesses the threats and vulnerabilities of different categories of NPOs as defined by FATF as well as the existing mitigants to arrive at the overall risk of each category.

The report provides key findings of the assessment and the recommendations included below;

1. The overall TF risk assessment of FATF NPOs in Uganda is rated Low where:

i. Non-Governmental Organizations (NGOs) - Low;ii. Community Based Organizations (CBOs) - Low;iii. Trusts - Low;iv. Faith Based Organizations (FBOs) - Low;

2. The FATF NPOs which pose a higher TF risk are;

i. FBOs that Operate Madrassas.ii. NPOs that are involved in the governance sector.

3. There is limited regulatory capacity across competent Authorities to provide oversight and enforce compliance.

4. Most NPOs use cash in their transactions, which limits accountability and transparency in the use of funds.

5. Inadequate inter-agency cooperation and information sharing to support investigation and prosecution.

In order to mitigate the identified risks, the assessment team recommends the following measures:

1. FIA and the NGO Bureau should increase CFT awareness/outreach programs targeting the

EXECUTIVE SUMMARY


NPO sector in particular those identified as posing high TF risk to understand the risks NPOs are exposed to and the proposed mitigation measures.

2. Strengthen inter-agency coordination and cooperation to support CFT intelligence gathering, investigations, prosecution and confiscate the assets of those identified to be involved in TF.

3. Strengthen the institutional capacity of relevant agencies to provide effective oversight function of the NPO sector in matters related to CFT, following a risk-based approach.

4. The NGO Bureau should ensure that the NPO sector develops and implements strong internal controls to improve governance, transparency and accountability.

5. URSB, NGO Bureau and Ministry of Lands Housing and Urban Development should develop a mechanism to enable NPOs disclose beneficial ownership information at the time of registration and to keep information on beneficial ownership accurate and up to date.

6. The NGO Bureau should strengthen District NGO Monitoring Committees and Sub County NGO Monitoring Committees to supervise the operations of CBOs.

7. The NGO Bureau should establish a due diligence framework to verify all documents submitted to relevant agencies of government in the process of incorporation, registration and licensing of nonprofit organizations.

Based on the risk assessment report. Government of Uganda should take note of the findings and implement the recommendations to avoid misuse of the sector for TF.


INTRODUCTIONCHAPTER 01

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This Risk Assessment is in line with FATF Recommendation 8 and Immediate Outcome 10 which require countries to identify the organizations that fall under the FATF definition of NPOs and use available information to determine the features and types of those NPOs which based on their activities are likely to be at risk of being abused for Terrorist Financing. FATF also requires countries to apply focused and proportionate measures, in line with the risk-based approach, to such Non-Profit Organizations in order to protect them from terrorist financing abuse:

a. by terrorist organizations posing as legitimate entities;b. by exploiting legitimate entities as conduits for terrorist financing, including for the purpose of

escaping asset-freezing measures; andc. by concealing or obscuring the clandestine diversion of funds intended for legitimate purposes,

to terrorist organizations.

The Financial Action Task Force under recommendation 8 and its interpretive notes defines an NPO as a legal person or arrangement or organisation that primarily engages in raising or disbursing funds for purposes such as charitable, religious, cultural, educational, social or fraternal purposes, or for the carrying out of other types of “good works”.

The Non-Governmental Organizations Act, 2016 defines an organization to mean “a legally constituted non-governmental organization under the Act, which may be a private voluntary grouping of individuals or associations established to provide voluntary services to the community or any part, but not- for-profit or commercial purposes”.

In Uganda, NPOs play a vital role to complement government’s efforts to provide services and assistance to those in need especially in areas where the government has limited reach. The NPOs are mainly engaged in providing charitable services including among other activities, education; health; governance; religious; social; environment; cultural; civic advocacy; human rights; women empowerment/gender equality; youth and children empowerment; emergency and relief support / humanitarian/ disaster response; agricultural development; and financial inclusion.

Given the nature of their operations, NPOs enjoy public trust; access large volumes of donations from multiple sources; operate and provide cash-intensive programs and services; have global presence and operate in high-risk areas and conflict zones. These factors may make some NPOs attractive to criminal elements for use as vehicles to finance terrorism.

The overall objective of this risk assessment is to provide an understanding of the terrorism financing risk posed by the NPO sector in Uganda. The specific objectives include:

a. Identify and assess the terrorism financing threats and vulnerabilities of the NPO sector in Uganda.

b. Profile the NPOs in Uganda which pose higher TF risk. c. Propose recommendations on how to mitigate the identified risks.

The NGO Bureau and Ministry of Lands Housing and Urban Development provides an estimate of 9,366 NPOs in Uganda that fall under the FATF definition of an NPO.

1. INTRODUCTION

INTRODUCTIONCHAPTER 01


Table 1: FATF NPOs in Uganda‘FATF NPOs’ Description No.NGOs Includes indigenous, foreign, continental, regional and

international organizations licensed by the NGO Bureau under the National NGO Act 2016.

2,226

CBOs Includes indigenous organizations that operate at sub-county level and district level registered under the National NGO Act 2016

1,130*

Trusts Includes trusts created under Trustees Incorporation Act, Cap 165, Trusts Act, Cap 164 and the Public Trustee Act, Cap 161.

1,010

Faith Based Organizations

Includes Companies limited by guarantee under the Companies Act, 2012, Trustees Incorporation Act, Cap 165, the church of England Trustees Act, Cap 158

5,000*

Total FATF NPOs 9,366*Estimated numbers

The following types of organizations also exist in Uganda but do not fall under the FATF definition of NPOs and thus are not subject to the FATF standards or the scope of this risk assessment exercise. They are listed in the table below.

Table 2: Non-FATF NPOs in Uganda

‘Non-FATF NPOs’ DescriptionPolitical Parties (26 in total) These are entities formed to acquire and exercise

political power.Sports Associations (Estimated to be 50) These are public or private organization for

athletes and sports enthusiasts.Trade Unions These are member-owned organizations formed

largely for welfare purposes. Their main aim is to advance the interests of their members.

Professional Associations These are organizations that act as umbrella bodies for professionals or members working within the same or similar fields.

One-off fundraising drives and appeals Temporary activities which are not legal persons, arrangements, or organizations but are engaged in the conducting of “good works” for certain periods.

Social Clubs e.g., Lion and Rotary clubs These are member associations/social clubs engaged in the conducting of charitable activities.

Cultural Institutions These are traditional cultural bodies created by law under the Uganda Constitution that work for the preservation and promotion of culture. These occasionally conduct charitable activities and other “good works”.


METHODOLOGYCHAPTER 02

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The methodology used in the Risk Assessment for the NPO Sector was based on the FATF guidance, the World Bank Methodology and consultation with public and private sector stakeholders using a structured survey questionnaire. The methodology combined qualitative and quantitative information, professional expertise, financial intelligence, classified security information, media and other publications to identify terrorism financing threats and vulnerabilities of the NPO Sector in Uganda.

This is a country self-assessment. The working group obtained information from various sources including field surveys and from law enforcement agencies and analyzed it using the World Bank NPO assessment tool. The threat analysis considered the specific predicate offences of terrorism and terrorism financing, the terrorism financing trends and methods, and the proximity to active terrorist threats. The vulnerability assessment considered inherent vulnerability which arises from the organisational profiles, operational features and methods used by NPOs to transfer funds.

Furthermore, the Terrorist Financing (TF) assessment focused on the available data from Law Enforcement Agencies regarding TF/terrorism convictions, prosecutions, investigations, intelligence, STRs and terrorism allegations in credible open sources. The analysis also considered available information on the financial behavior of terrorist organizations deemed to be operating in Uganda such as Al-Shabaab, LRA and the ADF.

The national wide survey was conducted on the NGO category of NPOs in Uganda, to understand the operations of the NGO Sector. The working group used stratified sampling method in which NGOs were selected based on their regions of operations. The NGOs from each region were selected using simple random sampling method. The Questionnaires were sent out to 228 NGOs which were selected from the record of 2,226 NGOs registered with the National NGO Bureau as at January 28, 2021. A total of 220 NGOs responded which represents 10.2% of the registered NGOs.

2. METHODOLOGY

CHALLENGES AND LIMITATIONSCHAPTER 03


The Working Group on NPO TF Risk Assessment faced several challenges in the process of assessing the nature and level of TF risks in the NPO sector in Uganda, these included;

i. Limited data. The database kept by the relevant agencies relating to NPOs for example the National Bureau for NGOs, Ministry of Lands Housing and Urban Development (for Trusts) does not adequately cover sources of funding and is still being updated from the manual format and therefore time-consuming to collate and analyze available information. To some extent, this challenge made it difficult for the Working Group to carry out in-depth TF risk assessment of the NGO sector especially at individual NGO level. The Bureau has identified the importance of collecting and maintaining proper statistical information on all NGOs in order to effectively understand the sector and significantly invested in data cleanup and update.

ii. Limited stakeholder engagements due to the restrictions put in place by the Government to contain the spread of COVID-19 pandemic (the Standard Operating Procedures). This challenge was overcome by using online platforms to share information and focus group discussions by key stakeholders.

iii. Lack of typology studies undertaken on TF as result of low suspicious transactions/activities reported to the FIA.

3. CHALLENGES AND LIMITATIONS


THE NPO SECTOR IN UGANDACHAPTER 04

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The NPO sector in Uganda is comprised of the following categories namely, Non-Governmental Organizations (NGOs); Community Based Organizations (CBOs); Trusts; and Faith Based Organizations (FBOs).

The analysis of the FATF NPO sector considers categories of NPOs, legal and regulatory framework, funding sources, channels and delivery of services. However, other entities which do not meet the FATF definition of NPOs were not considered for this assessment.

The legal framework for regulating the NPO sector in Uganda includes the following; Non-Governmental Organizations Act, 2016, NGO Regulations 2017, Companies Act, 2012, Anti Money Laundering Act, 2013, (as amended), Anti Money Laundering Regulations, 2015, Anti-Terrorism Act, 2002 (as amended), Anti-Terrorism Regulations, 2017, Trustees Incorporation Act, Cap 165, the Church of England Trustees Act, Cap. 158, Trusts Act, Cap. 164 and the Public Trustee Act, Cap. 161. However, there other sector specific laws that govern NGO operations in those sectors for example; Refugees Act, 2006, and Local Governments Act, Cap. 243 (as amended) among others.

ANALYSIS OF DIFFERENT FATF NPO CATEGORIES IN UGANDA

The TF threat assessment combined the different categories of FATF NPOs which exist in Uganda and are subject of this assessment namely, Non-Governmental Organizations (NGOs), Community Based Organizations (CBOs), Trusts and Faith Based Organizations (FBOs). The assessment used primary data from the field and secondary data from relevant regulatory agencies.

FATF defines a TF threat as a person or group of people (natural and legal persons) with the potential to cause harm by raising, moving, storing or using funds and other assets (whether from legitimate or illegitimate sources) for terrorist purposes. TF threats may include domestic or international terrorist organizations and their facilitators, their funds, as well as past, present and future TF activities, individuals and populations sympathetic to terrorist organizations.This assessment indicates that NPOs are largely not involved in a wide range of activities which would potentially expose them to TF risks.

The ML/TF National Risk Assessment 2017 indicates that Uganda is exposed to TF threats which are mainly external, arising from East, Central and Southern Africa region. The active terrorist organizations which pose a threat to Uganda include; ADF, LRA, Al Shabab, Al Qaeda and Democratic Front for the Liberation of Rwanda (FDLR).

Analysis of each category of FATF NPOs is indicated below.

4. THE NPO SECTOR IN UGANDA

NON-GOVERNMENTAL ORGANIZATIONS (NGOS)CHAPTER 05


5.1. NATURE AND SCOPE OF THE NGO SECTOR

The Non-Governmental Organizations Act, 2016 defines an organization to mean “a legally constituted non-governmental organization under the Act, which may be a private voluntary grouping of individuals or associations established to provide voluntary services to the community or any part, but not- for-profit or commercial purposes”.

According to the NGO Act, 2016, the NGOs are categorised as indigenous, regional, continental, foreign and international organisations.

i. An Indigenous Organization is wholly controlled by Ugandan citizens.

ii. A Regional Organization is incorporated in one or more of the partner states of the East African Community, and which is partially or wholly controlled by citizens of one or more of the partner states of the East African Community, and which is operating in Uganda under the authority of a permit issued by the Bureau.

iii. A Continental Organization has its original incorporation in any African country, other than the partner states of the East African Community, and is partially or wholly controlled by citizens of one or more African countries, other than the citizens of the partner state of the East African Community, and is operating in Uganda under the authority of a permit issued by the Bureau.

iv. An International Organization has its original incorporation in a country, other than a partner state of the East African Community and is partially or wholly controlled by citizens of one or more countries, other than the citizens of the partner states of the East African Community, and is operating in Uganda under the authority of a permit issued by the Bureau.

v. A Foreign Organization is one which is partially or wholly controlled by citizens of other countries, other than the citizens of the partner states of the East African Community, and is operating in Uganda under the authority of a permit issued by the National NGO Bureau. Foreign organization does not have original incorporation in any other country other than Uganda.

Table 3: Summary of NGOs by category

NPO Type Count of No.Indigenous 1,599Foreign 348International 225Regional 31Continental 23Total 2,226

Data source: The Updated National NGO Register (UNNR) January 30, 2021

5. NON-GOVERNMENTAL ORGANIZATIONS (NGOs)



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Table 4: Summary of NGO Types by Country of Origin

Country of origin Total1 Uganda 1,7252 United States of America 2043 United Kingdom 564 Netherlands 215 South Korea 216 German 187 Canada 168 Nigeria 159 Italy 1210 India 1011 Beligium 912 Switzerland 913 Kenya 714 Denmark 615 Japan 616 Turkey 617 Democratic Republic of Congo 518 France 519 Ireland 520 Austria 421 Australia 422 Sweden 423 Norway 324 China 325 New Zealand 326 Rwanda 327 Somalia 328 Sudan 329 Burundi 230 Kuwait 231 Saudi Arabia 232 Brazil 233 Finland 234 Hong Kong 235 Romania 236 South Sudan 237 Singapore 238 South Africa 239 Spain 240 Taiwan 2



Table 5: Summary of NGO management control by citizenship as at January 30, 2021

Nationality Continental Foreign Indigenous International Regional Total1 Ugandan 9 129 1230 58 13 14392 Ameican 105 36 69 3 2133 British 1 35 7 26 694 Canadian 1 14 6 9 1 315 German 9 4 12 256 Nigerian 7 11 2 5 257 Kenyan 1 4 7 5 6 238 Dutch 10 2 9 219 South Korean 16 2 2 2010 Australian 7 5 3 1511 Indian 8 1 4 1312 Danish 5 1 5 1113 Italian 2 2 6 1014 Congolese 3 4 2 915 Belgian 5 3 816 Irish 2 2 4 817 Rwandese 2 3 2 1 818 South

Sudanese3 2 3 8

Country of origin Total41 Albania 142 Andorra 143 Egypt 144 Ethiopia 145 Ghana 146 Israel 147 Namibia 148 Scotland 149 American Samoa 150 Bermuda 151 Jamaica 152 Philippines 153 Ukraine 154 Poland 155 United Arab Emirates 156 Zimbabwe 1

Total 2,226Data source: The Updated National NGO Register (UNNR) January 30, 2021.



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Nationality Continental Foreign Indigenous International Regional Total19 Swiss 4 1 3 820 Turkish 6 1 721 Swedish 4 2 622 Chinese 3 2 523 Ethiopean 1 3 1 524 French 3 2 525 Ghanian 1 4 526 Japanese 2 3 527 Norwegian 1 2 2 528 New Zealand 3 2 529 Zimbabwean 1 2 2 530 Burundian 1 1 2 431 Egyptian 1 1 2 432 Finnish 2 2 433 Spanish 2 1 1 434 English 1 2 335 Saudi Arabian 3 336 Somalian 2 2 337 South African 1 2 338 Tanzanian 1 1 1 339 Austrian 1 1 240 Burkinabe 1 1 241 Chinese (HK) 2 242 Chinese

(Taiwan)2 2

43 Czech 2 244 Isreali 2 245 Malaysian 2 246 Polish 1 1 247 Portuguese 1 1 248 Romanian 1 1 249 Slovak 2 250 Trinidadian 1 1 251 Albanian 1 152 Algentinian 1 153 Brazilian 1 154 Jamaican 1 155 Kuwaiti 1 156 Malawian 1 157 Panamanian 1 158 Philippine 1 1



Nationality Continental Foreign Indigenous International Regional Total59 Qatari 1 160 Sierra

Leonean1 1

61 Singaporean 1 162 Somali 1 163 Sri Lankan 1 164 Sudanese 1 1

Total 24 431 1328 269 34 2086

Table 6: Summary of NGOs by activity

Activity Type Activity Sub Totals

Totals

1 Service Social Development 1517

2085(93.7%)

2 Service Health 2463 Service Education 1984 Service Works & Transport 45 Service Land & Housing 36 Service Trade, Industry & Cooperatives 37 Service Agriculture 608 Service Water & Environment 549 Expressive Justice Law & Order Sector 69

141(6.3%)

10 Expressive Science, Technology & Innovation 1411 Expressive ICT 1312 Expressive Public Sector Management 1313 Expressive Accountability 1014 Expressive Tourism 815 Expressive Energy & Minerals 516 Expressive Legislature 517 Expressive Public Administration 4

Grand Total 2,226Data source: The Updated National NGO Register (UNNR) January 30, 2021

5.2. LEGAL AND INSTITUTIONAL FRAMEWORK GOVERNING NGOs

i. The NGO Act, 2016The principal law regulating the activities of NGOs in Uganda is the NGO Act, 2016. The National Bureau for NGOs is established under Section 5 of the NGO Act, No. 5 of, 2016. It has a regulatory and supervisory mandate over the NGO sector in Uganda. The powers and mandate include among others, register, formulate policies and guidelines, investigate, monitor, prosecute, or sanction NGOs that do not comply with the Act.

While the Bureau has demonstrated positive strides in carrying out its mandate, the data from the survey, indicated that the NGO sector is lacking comprehensive statistics on the number



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of NGOs operating in Uganda. It was noted that the Bureau is not fully resourced to do a full oversight role on the sector. The NGO Act requires NGOs to comply with a number of requirements which include: incorporation, registration, licensing, renewal of NGO permits within six months before their expiry, seeking the Bureau’s consent to make changes to governing documents where appropriate, requesting for review of permits, giving the NGO Bureau correct information, submission of annual returns, remaining transparent and accountable in their operations. Other requirements include: notifying the Bureau when an organization ceases to exist; complying with their internal governance documents; signing Memoranda of Understanding with relevant authorities; and complying with other relevant laws and legislation related to anti-Money laundering and financing of terrorism, immigration, employment, and Public Order Management.

Section 29 (2) (b) of the NGO Act, 2016 requires a Certificate of Incorporation by the applicant for an NGO Certificate as evidence of its legal existence. An NGO would need a certificate of incorporation as a company limited by guarantee from URSB or the relevant authority from the country of origin.

The other laws that have a bearing on the operations of NGOs in Uganda include;

The Anti-Money Laundering Act, 2013 (amended)The Anti-Money Laundering Act, 2013 (as amended) lists NGOs as accountable persons under the Second schedule to the Act. Under the Act, NGOs have obligations to comply with AML/CFT control measures which includes registration with the Financial Intelligence Authority (FIA).

The Financial Intelligence Authority, is established by the Anti-Money Laundering Act, (amended) 2013 under Section 18, with the mandate to combat money laundering and the financing of terrorism. Under its mandate the FIA is obliged to ensure that accountable persons including NGOs comply with the provisions of the AMLA and increase AML/CFT awareness.

In fulfillment of the above mandate, FIA has registered 792 NGOs, conducted several NGO outreaches to increase AML/CFT awareness, and collaborated with the NGO Bureau and the NGO networks to ensure compliance of AML/CFT laws.

Licensing and registration agencies are also listed as accountable persons in the second schedule of the Act. Therefore, the NGO Bureau, URSB, Ministry of Lands, are accountable persons who provide additional scrutiny to the operations of the NGOs in line with the AMLA.

ii. The Companies Act, 2012The Companies Act, No. 1, 2012, under Section 4 (2)(b) defines a company as having the liability of its members limited by the memorandum of association to the amount that the members undertake in the memorandum of association to contribute to the assets of the company if it is being wound up. All companies in Uganda are registered by the Uganda Registration Services Bureau (URSB).

The Uganda Registration Services Bureau (URSB) is a semi-autonomous government agency, established under Section 3, of The Uganda Registration Services Bureau, Act, and Cap.2010. URSB is responsible for civil registrations, business registrations, registration of patents and any other registrations required by law.



Under the Companies Act, the URSB is mandated to incorporate companies limited by guarantee. It registers, and maintains particulars for company directors, secretary, physical location of the company, and annual returns. The URSB is also mandated to register documents under the Registration of Documents Act, Cap 81.

Whereas the URSB has the above-mentioned mandate, it lacks capacity to monitor and enforce compliance of the law.

iii. Self-Regulatory Bodies (SRBs)Section 37 of the NGO Act allows two or more organizations to form a self-regulating body which should be registered with the NGO Bureau. A “Self-regulatory body” refers to a body set up by registered organizations that have come together and agreed that the body exercises some degree of regulatory authority over them upon consenting or resolving that they would abide by a set code of conduct, rules and procedures.

5.3. FUNDING SOURCES, CHANNELS AND ACTIVITIES

The funding sources, channels and activities undertaken vary across the NGO Sector. According to information collected from the survey, the main sources of funds to NGOs include; grants inclusive of government funding (19%), subscription/membership fees (20%), social enterprise (8%), community contributions, religious contributions, donations (53%) and public fundraising (1%).

Figure 1: Funding Sources for NGOs

The channels through which NGOs receive funds include; formal financial institutions, informal providers of financial services, mobile money, cash, social media/online collections, as well as goods and services in kind. According to the survey data, electronic funds transfers and cash are the leading channels used, as indicated in the figure below.



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Figure 2: Transaction Channels used by NGOs

The activities undertaken by NGOs include service and expressive which might provide intangible services and in-kind goods. The service activities mainly include housing, education, social services, health care and agriculture while the expressive activities include sports and recreation, arts and culture, interest representation and advocacy. According to the survey data, 84% of NGOs are engaged in service-oriented activities while 16% are engaged in expressive activities.

Figure 3: Nature of NGO Activities

Education, social development, health and agriculture are the main areas of NGO activity in Uganda, as per the survey.



Figure 4: Activities conducted by NGOs

The survey found that NGOs rely heavily on volunteers for the implementation of their project/program-based activities. In some cases, even the foreign citizens administering the NGOs, are volunteers themselves. As illustrated below, the majority of NGOs have a very lean staffing structure.

Figure 5: NGO Staffing Levels

78% of the survey respondents confirmed raising funds from abroad. Some confirmed having funding sources in Uganda (secondary funding) from large donors such as Democratic Governance Facility (DGF); European Union (EU), Deutsche Gesellschaft Fur Internationale Zusammenarbeit (GIZ), other NGOs in Uganda, member fees, tithes and offerings, and a shift by a few NPOs to income generating activities, as a result of budget cuts by donors. Data from the Bureau indicates that, the leading countries that fund the NGOs are the United States of America (USA), Uganda, United Kingdom (UK), Italy, Switzerland, Denmark, Netherlands, Ireland and Germany. This is illustrated by the survey findings as indicated in the table below.



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Table 7: Sources of NGO funding

Source Country ShareUSA 29.0%Uganda 13.5%UK 12.6%Germany 5.3%Canada 4.8%Denmark 3.9%Australia 3.9%Netherlands 3.4%Norway 2.4%Sweden 2.4%Italy 1.9%Ireland 1.4%Belgium 1.0%Austria 1.0%Switzerland 1.0%Kuwait 1.0%UAE 1.0%Saudi Arabia 1.0%Others 9.7%

NGO Threat AnalysisThis assessment indicates that NGOs are largely not involved in a wide range of activities which would potentially expose them to TF risks. In light of the above, the TF threat for NGOs in Uganda is rated 0.12 which is Low (L).

5.4. TF VULNERABILITIES IN THE NGO SECTOR

a. Inherent VulnerabilitiesVulnerabilities in the NGO sector were assessed at both institutional and sectoral level. These include:

1. Inadequate legal framework. The Companies Act, imposes no obligation to divulge beneficial ownership information to be included on the register. Some sub-categories of NGOs also have specific vulnerabilities arising from their registration requirements:

Foreign NGO- is A Foreign Organization is one which is partially or wholly controlled by citizens of other countries, other than the citizens of the partner states of the East African Community, and is operating in Uganda under the authority of a permit issued by the National NGO Bureau. Foreign organization does not have original incorporation in any other country other than Uganda. Although the NGO Bureau demands a certificate of incorporation from URSB or the Ministry of Lands in order to register a Foreign NGO, this can be a potential vulnerability to abuse for evasion of sanctions if no proper due diligence is done to establish the beneficial owners at both incorporation and issuance of



NGO permit especially if controlled by foreign criminals.

2. Limited regulatory capacity to provide oversight and enforce compliance.

3. The significant use of cash in the delivery of programs by NGOs which creates transparency and accountability challenges.

4. Limited inter-agency cooperation and information sharing. Most agencies regulating the work of NGOs operate in silos despite the fact that they have information which may support TF investigations and prosecution.

5. Inadequate TF preventive measures which include poor due diligence on key personnel, volunteers, partners and beneficiaries, inexperienced staff, limited CFT training in the NGO sector, poor record keeping and weak internal controls

Based on the above, the TF vulnerability for Non-Governmental Organizations is 0.40 which is rated to be Medium Low (ML).

The following mitigants reduce the level of risk in the NGO sector.

b. Mitigation Measures.

1. The NGO Act, 2016 provides for the registration, supervision and sanctioning of non-compliant NGOs. In addition, the Companies Act requires all companies limited by guarantee to be registered under the Companies Act, which includes NGOs. DNMCs are also mandated to participate in the process, and can help to minimize the vulnerability and threats of the sector being used for TF.

2. The Anti-Money Laundering Act, 2013 (as amended) lists NGOs and all licensing authorities including the NGO Bureau and URSB as accountable persons. This increases scrutiny on the operations of the NGOs in relation to TF.

3. The existence of self-regulatory mechanism provided for under the NGO Act, 2016 ensures that members abide by Code of Conduct, rules and procedures. Self-regulation can also help to minimize the costs of supervision incurred by government.

4. The Financial Intelligence Authority, is mandated to enforce compliance by all accountable persons including NGOs, with the provisions of the AMLA and increase AML/CFT awareness. In fulfillment of this mandate, FIA has registered 792 NGOs, conducted several NGO outreaches to increase AML/CFT awareness, and collaborated with the NGO Bureau and the NGO networks to ensure compliance of AML/CFT laws.

c. Overall TF Risk of NGOs

In light of the above, the overall TF risk for NGOs in Uganda is rated 0.12 which is considered to be Low (L).



26

Figure 6: Evidence of Level of terrorist financing abuse of NGOs

Figure 1: Evidence of Level of terrorist financing abuse of NGOs.

Number of TF/terrorism STRs 0.2

Number of TF/terrorism

Allegations in credible

0.2 Diversion of funds NGOs 0.5 Size

Evidence of level of terrorist financing abuse of NPO

0.0Number of

TF/terrorism Convictions

0.0Number of

TF/terrorism Prosecutions

0.2Number of

TF/terrorism Investigations

0.2Number of

TF/terrorism Intelligence

0.2

0.0 Affiliation with a terrorist entity

1.0 Activity type

0.2 Abuse of programming

0.08 TF Typologies 0.2 Offshore/complex control structure

0.0 False representation/Sham

0.5 Level of verifiability of fundraising methods

0.2 Level of cash transfers, valuable in-

0.53 NPO Profile

0.0 Support to recruitment efforts

0.0 Level of accountability

0.2 Level of risk appetite

0.2 Transfer of funds 0.20 Proximity to active terrorist threat 0.2 Complexity / length of

operational chains0.34 Operational features

0.12 Threat 0.40 Inherent vulnerability (per 0.2 Collection of funds

0.5 Use of cash

0.29 Methods to transfer funds 0.0 Use of virtual

currency

0.2 Expenditure of funds 0.2 Reliance on transitory or informal workforce

0.12 Inherent risk

0.5 Level of professionalism

NPO Risk Assessment

0.2 Use of informal money transfer

0.5 Quality of Governance

0.64 Mitigating measures 0.5 Quality of outreach and education

0.5 Quality of Financial management

0.5 Quality of NPO policies

0.5 Quality of Project management

0.50 NPO measures 0.78 Government measures 1.0

Level of self-regulation (incl.

Scope of registration of FATF NPOs

0.5 Quality of staff vetting and oversight

0.5 Availability and accessibility of

0.5 Level of commitment to ethics and

1.0 Avoiding disruption of NPO activities

0.5

COMMUNITY BASED ORGANISATIONS (CBOs) SECTOR IN UGANDACHAPTER 06


6.1. NATURE AND SCOPE OF THE CBO SECTOR

The Non-Governmental Organizations Act, 2016, defines a CBO as an organization operating at sub county level and below, whose objective is to promote and advance the well-being of the members of the community. The Act also defines “organization” as a legally constituted non-governmental organization, which may be a private voluntary grouping of individuals or associations established to provide voluntary services to the community or any part, but not for profit or commercial purposes. The CBOs are fully fledged NPOs eligible for regulation by the NGO Bureau. They qualify as “organizations” defined in the NGO Act 2016, and fit the FATF definition through their charitable nature.

The operational scale of a CBO is limited though indirectly, to only multiple villages in one or more sub counties that do not constitute a district. The geographical limitation is a good measure, but information about its enforcement is not available. It is thus, not yet possible to detect if some CBOs operate at district scale illegally. Available statistics indicate that registered CBOs with the districts total to 1130. Statistics on the funding sources and amounts is scanty.

6.2. LEGAL AND INSTITUTIONAL FRAMEWORK GOVERNING CBOs

The law that governs CBOs is the NGO Act, 2016.Under Section 20 and 21 of the NGO Act, the Act mandates the District and Sub-County NGO Monitoring Committees to monitor the work of NGOs in their respective jurisdictions. DNMCs recommend NGOs for registration with the Bureau, receive and review activities and budgets of NGOs and register CBOs. SNMCs monitor the work of NGOs and CBOs in their respective jurisdictions. However, the DNMCs and SNMCs are not operational in some districts and many lack funds to conduct their oversight work.

6.3. TF RISK ASSESSMENT FOR THE CBOs

i. Threat AnalysisThe TF risk assessment of the CBOs in Uganda used primary data from the field and secondary data from relevant regulatory Agencies/bodies. This information indicates that CBOs are largely not involved in a wide range of activities which would potentially expose them to TF risks.

In light of the above, the TF threat for CBOs in Uganda is considered to be 0.10 which is rated to be Low (L).

ii. TF Vulnerabilities in the CBOsVulnerabilities in the CBOs are as follows;

1. Limited capacity by the NGO Bureau, District NGO Monitoring Committees and Sub- County NGO Monitoring Committees to provide oversight on operations of CBOs.

2. Inadequate mechanisms to verify identification documents which are presented to the NGO Bureau by the respective CBOs. Criminals may take this advantage to register CBOs for purposes of Terrorism Financing.

6. COMMUNITY BASED ORGANISATIONS (CBOs) SECTOR INUGANDA



28

3. There is no legal requirement under the Companies Act, other laws governing the operations of CBOs to disclose beneficial ownership information at the time of registration and to keep information on beneficial ownership accurate and up to date.

4. The significant use of cash in the delivery of programs by CBOs which creates transparency and accountability challenges

5. Inadequate TF preventive measures which include poor due diligence on key personnel, volunteers, partners and beneficiaries, inexperienced staff, limited CFT training for CBOs poor record keeping and Weak internal controls

6. Limited resources to provide training to staff and board on CTF obligations.

7. CBOs have limited capacity to verify the credibility of the funders of their programs.


Based on the above, the TF vulnerability for CBOs is rated 0.42 which is Medium Low (ML).

iii. Mitigation Measures in the CBOsThe following mitigants reduce the level of risk in CBOs.

1. The NGO Act, 2016 provides for the registration, supervision and sanctioning of non-compliant CBOs. DNMCs are also mandated to participate in the process, and can help to minimize the vulnerability and threats of the CBOs being used for TF.

2. The National Bureau for NGOs has supervisory mandate over CBOs under Section 5 of the NGO Act, No. 5 of, 2016. It has the powers to register, formulate policies and guidelines, investigate, monitor, prosecute, or sanction CBOs that do not comply with the Act.

3. CBOs mostly receive funding from NGOs and other charitable organizations that are already regulated by the National Bureau for NGOs and FIA.

iv. Overall TF Risk of CBOs

The overall TF Risk Rating for CBOs is rated 0.10 which is Low (L).



Figure 7: Evidence of Level of terrorist financing abuse of CBOs

Figure 1: Evidence of Level of terrorist financing abuse of CBOs.

0.2 Use of informal money transfer

0.5 Use of cash

0.29 Methods to transfer funds 0.0 Use of virtual

currency

Complexity / length of operational chains

0.34 Operational features

1.0 Activity type

0.5 Level of verifiability of fundraising methods

0.2 Reliance on transitory or informal workforce

0.5 Level of cash transfers, valuable in-

0.2 Diversion of funds

0.0 Affiliation with a terrorist entity

0.2 Abuse of programming

0.0 Offshore/complex control structure

0.59 NPO Profile

0.0 Level of accountability

0.2 Size

0.2 Transfer of funds

Inherent vulnerability (per

0.10 Inherent risk

0.0 Support to recruitment efforts

0.0 False representation/Sham

0.100.0 Collection of funds

0.2 Expenditure of funds

0.2 Availability and accessibility of

0.5 Quality of outreach and education

0.5 Quality of NPO policies

1.0 Avoiding disruption of NPO activities

0.13 Proximity to active terrorist threat

0.5 Level of commitment to ethics and

0.5 Quality of Project management

0.5 Level of self-regulation (incl.

0.2 Quality of staff vetting and oversight

Government measures

0.0Number of

TF/terrorism Allegations in credible

CBOs

NPO Risk Assessment

TF Typologies0.08

0.45

0.5 Quality of Governance

0.5 Quality of Financial management

0.50 Mitigating measures

NPO measures 0.56

0.42Threat

0.5 Scope of registration of FATF NPOs

0.5 Level of professionalism

0.2 Level of risk appetite

0.2

Evidence of level of terrorist financing abuse of NPO

Number of TF/terrorism Convictions

0.0Number of

TF/terrorism Prosecutions

0.0 0.0Number of

TF/terrorism Investigations

0.0Number of

TF/terrorism Intelligence

0.0 Number of TF/terrorism STRs


TRUSTS SECTOR IN UGANDACHAPTER 07

30

7.1. NATURE AND SCOPE OF THE TRUSTS SECTOR

Trusts are legal arrangements involving private trust or a public charitable trust. A trust is governed by the terms of the trust document, common law principles, and the Trustees Incorporation Act, 1939. Private trusts are used for private purposes, such as running a private estate or institution and are not given any tax benefits by the Government of Uganda.

The practice of trusts is not common in Uganda with about 1,010 trustees registered with the Ministry of Lands Housing and Urban Development.1 After issuance of the certificate of Registration, the documents are returned to the Commissioner Land Registration for safe custody under Rule 7 of the Trustees Incorporation Rules SI 165-1.

The above information is accessible to competent authorities and the general public upon payment of the prescribed fees.

Under the AMLA, 2013, all trusts incorporated under the Trust incorporations Act 1939 and trustees are “accountable persons” and are therefore subject to all AML/CFT obligations under the Act.

7.2. LEGAL AND INSTITUTIONAL FRAMEWORK GOVERNING TRUSTS

Trustees Incorporation Act, Cap 165Trustees in Uganda are registered under the Trustees Incorporation Act, Cap 165. The Ministry of Lands, Housing and Urban Development administers the Trustees Incorporation Act, Cap 165. As per its Long Title, the Trustees Incorporation Act Cap. 165 is an Act of Parliament that provides for the incorporation of the trustees of certain bodies and associations of persons.

Section 1(1) thereof provides that trustees or a trustee may be appointed by anybody or association of persons established for any religious, educational, literary, scientific, social or charitable purpose, and such trustees or trustee may apply, in the manner hereafter mentioned, to the Minister (for Lands, Housing & Urban Development) for a certificate of registration of the trustees or trustee of such body or association of persons as a corporate body.

Section 1(3) provides that the trustees or trustee shall thereupon become a body corporate by the name described in the certificate, and shall have perpetual succession and a common seal, and power to sue and be sued in the corporate name, and subject to the conditions and directions contained in the certificate to hold and acquire, and by instruments under the common seal to convey, assign and demise any land or any interest in land now or hereafter belonging to, or held for the benefit of such body or association of persons in such and the like manner and subject to such restrictions and provisions, as such trustees or trustee might, without such incorporation, hold or acquire, convey or assign, or demise the same for the purposes of such body or association of persons.

The Ministry of Lands, Housing and Urban Development (MLHUD), is a cabinet-level government ministry of Uganda. It is responsible for policy direction, national standards and coordination of all matters concerning lands, housing and urban development. The Ministry of Lands, Housing and Urban Development administers the Trustees Incorporation Act,

1 Refer to www.mlhud.go.ug

7. TRUSTS SECTOR IN UGANDA

TRUSTS SECTOR IN UGANDACHAPTER 07 TRUSTS SECTOR IN UGANDACHAPTER 07


Cap. 165. After issuance of the certificate of registration, the documents are returned to the Commissioner Land Registration for safe custody under Rule 7 of the Trustees Incorporation Rules SI 165-1. The above information is accessible to competent authorities and the general public upon payment of the prescribed fees.

However, registration of trustees is optional in Uganda. Trustees are only required to register with the Ministry when they want to acquire land or certain interests in land. This means a trust can exist in Uganda without being registered.

7.3. TF RISK ASSESSMENT FOR TRUSTS

i. Threat AnalysisThe TF risk assessment of the Trusts in Uganda used primary data from the field and secondary data from relevant regulatory Agencies/bodies. This information indicates that Trusts are largely not involved in a wide range of activities which would potentially expose them to TF risks.

In light of the above, the TF threat for Trusts in Uganda is 0.07 which is Low (L).

ii. TF Vulnerabilities in TrustsTF Vulnerabilities in Trusts include;

1. There is no legal requirement under the Trustees Incorporation Act, Church of England Trustees Incorporation Act and Public Trust Act, for trusts and trustees to disclose beneficial ownership information at the time of registration and to keep information on beneficial ownership accurate and up to date.

2. The Trustees Incorporation Act only deals with the registration of trustees. Under S.1 of the Act, trustees are only required to register with the Ministry of Lands Housing and Urban Development when they want to acquire certain rights like land or interest in land. This makes the registration of trustees optional which means a trust or trustees can exist in Uganda without being registered.

3. Limited supervisory mechanism for trusts due to different regulatory frameworks which include; Trustees Incorporation Act which are regulated by Ministry of lands, Housing and Urban Development and Church of England Trustees Incorporation Act which are not regulated.

4. The Ministry of Lands Housing and Urban Development lacks capacity to enforce CFT controls on trusts as provided in the AMLA.


The TF vulnerability for Trusts in Uganda is rated 0.43 which is Medium Low (ML).

iii. Mitigation Measures

The following mitigants reduce the level of risk in the Trusts.1. The AMLA requires trusts incorporated under the Trustee Incorporations Act as

accountable persons to meet all AML/CFT obligations.



32

2. There is a legal framework under the Trust Incorporation Act 1939, the Church of England Act and the Public Trust Act which provides for the registration and supervision of trusts.

iv. Overall TF Risk

The overall TF Risk Rating for Trusts is rated 0.07 which is Low (L).

Figure 8: Evidence of Level of terrorist financing abuse of Trusts

Figure 1: Evidence of Level of terrorist financing abuse of Trusts.

FAITH BASED ORGANIZATIONS (FBO) IN UGANDACHAPTER 08



8.1. NATURE, SCOPE AND LEGAL FRAMEWORK OF THE FBO SECTOR

Faith Based Organization are nonprofit organizations whose values and activities are based on faith and/or beliefs, which promotes activities based on social values of a particular faith, and which most often draws its activities (leaders, staff, volunteers) from a particular faith group. For purposes of this assessment FBOs analysis considered only places of worship. FBOs are estimated to be 5,000 in number spread across the whole country.

The government allows religious groups to obtain legal entity status under the Trustees Incorporation Act. The Catholic Church, Orthodox Church, Anglican Church, and the Uganda Muslim Supreme Council are registered under this provision; however, evangelical and Pentecostal churches which carry out NGO related activities are required to register with the Ministry of Internal Affairs at the National Bureau for Non-Governmental Organizations (NGOs).

8.2. TF RISK ASSESSMENT FOR THE FBOsi. Threat Analysis

Most Faith-Based Organizations such as evangelical and Pentecostal churches, mosques, temples among others first incorporate as companies limited by guarantee or trusts after which they are required to register with the NGO Bureau and obtain operational permits in case, they are to engage in charitable activities other than faith related activities.

TF risk assessment of FBOs in Uganda used secondary data from relevant regulatory Agencies/bodies. This information indicates that majority of FBOs are not involved in a wide range of activities which may expose them to TF risks. The exceptions include the few FBOs that also run madrassas. Some Madrassas have been subject of criminal investigations for Terrorism.

In light of the above, the TF threat for FBOs in Uganda is 0.07 which is Low (L).

ii. TF Vulnerabilities in FBOsThe assessment has not identified any significant TF vulnerabilities for FBOs except for the aforementioned madrassas which include the following.

1. The significant use of cash in the delivery of programs which creates transparency and accountability challenges.

2. Inadequate TF preventive measures which include poor due diligence on key personnel, volunteers, partners and beneficiaries, inexperienced staff, poor record keeping and Weak internal controls.

3. There are limited standards in place for the establishment of Madrassas.


5. There is no legal requirement under the Companies Act, Trustee Incorporation Act and other laws governing the operations of FBOs to disclose beneficial ownership information at the time of registration and to keep information on beneficial ownership accurate and

8. FAITH BASED ORGANIZATIONS (FBOs) IN UGANDA


FAITH BASED ORGANIZATIONS (FBO) IN UGANDACHAPTER 08

34 TERRORISM FINANCING RISK ASSESSMENT34

up to date.

The TF vulnerability for FBOs is rated 0.22 which is considered to be Low (L).

iii. Mitigation MeasuresThe following mitigants reduce the level of risk in FBOs.

1. There is a self-regulatory mechanism for different FBOs and arrangements.2. FBOs are founded on morals, faith and ethical standards.

iv. Overall TF Risk of FBOs.

The overall TF risk is rated 0.07 which is considered Low (L).

Figure 9: Evidence of Level of terrorist financing abuse of FBOs.

Figure 1: Evidence of Level of terrorist financing abuse of FBOs.

CATEGORY OF NPOs AT RISK OF TF ABUSECHAPTER 09


FATF recommendation 8 requires countries to identify the category of NPOs which due to their activities or characteristics are likely to be at risk of abuse.

There is little specific or relevant evidence of TF abuse of FATF NPOs in Uganda. All possible sources for terrorist financing abuse of NPOs have been reviewed and analyzed. Four (4) suspicious transactions reports were identified linking NPOs with potential terrorism financing but investigations are still ongoing.

This assessment has identified two major categories of NPOs that are at high risk of TF abuse namely, Faith Based Organizations (FBOs) which operate madrassas and NGOs involved in the governance sector.

9.1. FBOs THAT OPERATE MADRASSAS

The National ML/TF risk assessment 2017 indicated that some FBOs are involved in TF activities through radicalization and recruitment of youth. Such organizations are considered high risk for TF. TF investigations have been conducted by Law Enforcement Agencies in Uganda involving FBOs that operate Madrassas for recruitment of mainly the youth for terror related activities.

Charity organizations with links to ADF (not disclosed for fear of jeopardizing investigations) are currently being investigated for their involvement in TF activities.

9.2. NPOS THAT ARE INVOLVED IN THE GOVERNANCE SECTOR

The assessment has found that Bank accounts of 4 NGOs all in the governance sector have been frozen on account of suspected TF. These NPOs have been categorized as high risk on the basis of suspicious transaction reports. Criminal investigations are ongoing and at the same time there are interlocutory court proceedings ongoing in relation to the same investigations.

9. CATEGORY OF NPOs AT RISK OF TF ABUSE


KEY FINDINGSCHAPTER 10

36

1. The overall TF risk assessment for the NPO Sector in Uganda is rated Low where:

i. Non-Governmental Organizations (NGOs) - Low.ii. Community Based Organizations (CBOs) - Low.iii. Trusts - Low.iv. Faith Based Organizations (FBOs) - Low.

2. The FATF NPOs which pose a higher TF risk are;

i. FBOs that Operate Madrassas.ii. NPOs that are involved in the governance sector.

3. There is limited regulatory capacity across competent Authorities to provide oversight and enforce compliance.

4. Most NPOs use cash in their transactions, which limits accountability and transparency in the use of funds.

5. Inadequate inter-agency cooperation and information sharing to support investigation and prosecution.

10. KEY FINDINGS

RECOMMENDATIONSCHAPTER 11


i. FIA and the NGO Bureau should increase CFT awareness/outreach programs targeting the NPO sector in particular those identified as posing high TF risk to understand the risks NPOs are exposed to and the proposed mitigation measures.

ii. Strengthen inter-agency coordination and cooperation to support CFT intelligence gathering, investigations, prosecution and confiscate the assets of those identified to be involved in TF.

iii. Strengthen the institutional capacity of relevant agencies to provide effective oversight function of the NPO sector in matters related to CFT, following a risk-based approach.

iv. The NGO Bureau should ensure that the NPO sector develops and implements strong internal controls to improve governance, transparency and accountability.

v. URSB, NGO Bureau and Ministry of Lands Housing and Urban Development should develop a mechanism to enable NPOs disclose beneficial ownership information at the time of registration and to keep information on beneficial ownership accurate and up to date.

vi. The NGO Bureau should strengthen District NGO Monitoring Committees and Sub County NGO Monitoring Committees to supervise the operations of CBOs.

vii. The NGO Bureau should establish a due diligence framework to verify all documents submitted to relevant agencies of government in the process of incorporation, registration and licensing of nonprofit organizations.

11. RECOMMENDATIONS


TERRORISM FINANCING RISK IN UGANDA BY NPO TYPECHAPTER 12

38

The analysis of the TF risk in the NPO sector showed that TF risk remains low after mitigation measures have been taken into account.

The assessment has indicated that NGOs have more inherent risk at 0.12 to TF abuse but have the highest mitigation measures at 0.64, CBOs inherent risk is rated 0.10, while mitigation measures are 0.50, Trusts inherent risk is rated 0.07 while mitigation measures are rated 0.43 and FBOs inherent risk is rated 0.07 and mitigation measures at 0.52 respectively.

The assessment and the methodology are based on the World Bank’s NPO self-assessment Tool, which is an analytical risk assessment tool developed by the World Bank to guide countries in conducting their TF risk assessment of the NPO sector. The tool consists of modules which are made up of variables that represent factors (threats and vulnerabilities) related to TF risks and the mitigating measures in place.

The figure below indicates inherent risk of each category of FATF NPOs against mitigating measures as generated by the tool.

12. TERRORISM FINANCING RISK IN UGANDA BY NPO TYPE

TERRORISM FINANCING RISK IN UGANDA BY NPO TYPECHAPTER 12


Figure 11: Evidence of Level of terrorist financing of NPOs

Figure 11: Evidence of Level of terrorist financing of NPOs

0.520.50

0.64

0.43

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00

Miti

gatin

g m

easu

res

Inherent risk

Terrorism Financing Risk in Uganda by NPO Type

FBOs

CBOs

NGOs

Trusts


REFERENCESCHAPTER 13

40

1. The FATF Recommendations, 20122. The Anti-Money Laundering Act, 2013 as amended3. Uganda’s Mutual Evaluation Report (MER), 20164. The National Risk Assessment (NRA) Report, 20175. The NGO Act, 20166. The Ministry of Lands, Housing & Urban Development Website; www.mlhud.go.ug7. Best Practices on Combating the Abuse of Non-Profit Organizations, www.fatf-gafi.org/

publications8. The FATF Terrorist Financing Risk Assessment Guidance. July, 2019.

13. REFERENCES