KAMPALA – Uganda’s unregulated and yet booming real estate sector is currently under threat, providing a haven for money laundering from foreign investors who seek to take advantage and invest illicit money in the sector.
Calls on government to regulate the sector in order to curb the vice are yet to bear fruit, even as the sector players take it upon themselves to reorganize.
Shirley Kongai, the President of The Association of Real Estates Agents in Uganda, an umbrella organization of real estate agents, managers, organizations and other real estate professionals in Uganda, acknowledges that loopholes in policy regulation make the sector susceptible to money laundering.
According to Ms Kongai, the association is trying to professionalize the sector despite the majority of players being informal and only care about their commission, not the source of the money.
“Definitely if there is a sector that is not well regulated, people will always take advantage of the loopholes. So true, there are people who clean their money using real estate. Even Ugandans who are corrupt clean their money in the real estate because we don’t have regulations as such. ” Ms Kongai told PML Daily in an interview.
Samuel Were Wandera, the Director of International Relations and Strategic analysis at the Financial Intelligence Authority, FIA says Uganda is a cash-based economy where it is difficult to trace the transactions. “FIA is struggling to regulate the real estate’s sector. ” Mr Wandera says.
The FIA was established in 2013 by an Act of Parliament, the Anti-Money Laundering Act, 2013 (AMLA), passed to provide for the prohibition and prevention of money laundering, to combat money laundering activities, impose certain duties on institutions (such as NGOs, churches and other charitable organizations) and other persons, among others.
Kongai told PML Daily that she has had a personal encountered with a man who confessed to stealing money and he thought of cleaning it in the real estate sector.
Without divulging details of her response and what happened thereafter, she expresses worry that little is being done by the government of Uganda to regulate the sector which also raises speculations among the players in the sector.
“If that person comes and buys property without caring about the prices that are how you start hearing property in Najera (a Kampala suburb) going for USD $1m and you wonder how? The neighbour will also say let me sell mine at that price. It causes inflation, distorts the market and raises speculation… It is a risk factor for Uganda. ”
In 2017, the FIA conducted a study and released the Money Laundering and Terrorist Financing National Risk Assessment Report which indicated that the Real Estate is the sector through which most illicit money is laundered in Uganda.
“Owing to the mushrooming real estate’s boom across the country and the experience of the team members, this report is of the view that the biggest sector through which proceeds are laundered in Uganda is the real estate, ” the report reads in part.
Whereas the report puts real estates as a highrisk sector, the FIA is incapacitated in many ways since the sector remains largely unregulated with no policies in place.
“At that time (2017), they told us that a plot of land in Kololo was more expensive than a similar piece in central London…. I don’t see why if that is not laundering. The launderer does not mind how much he puts in as long as the dirty money is disguised as clean money,” says FIA’s Wandera.
Wandera adds that the real estate’s sector continues to be a threat by launderers to Uganda’s economic reputation as a destination for dirty money since money from across borders, especially war-torn South Sudan have been evidently invested in the sector.
In September 2016, The Sentry -a watchdog body co-founded by Hollywood actor George Clooney and rights activist John Prendergast released an investigative report, “War Crimes Shouldn’t pay, stopping looting and destruction in South Sudan,” conducted for two years to ascertain the assets and wealth of top South Sudanese officials in the government and opposition. The report indicates that numerous South Sudanese including tycoons as young as under 20 years owned luxurious property and homes in Kampala and Entebbe in Uganda among other countries.
The report cites that the tycoons who are either relatives to government officials or government officials in South Sudan themselves have luxurious homes in upscale areas like Muyenga, Kawuku-Bwerega Road, halfway between Kampala and Entebbe among others.
The East African Newspaper on April 21, published an article that details concerns by the team of financial forensic experts from The Sentry — which noted that in 2016 its analysts publicly identified high-priced properties in both Kenya and Uganda acquired by South Sudan’s political and military elite involved in the civil war that has killed tens of thousands and displaced about four million others.
The luxury homes in upscale neighbourhoods in Kampala and Nairobi may have been bought with the proceeds of corruption, The Sentry said.
The Report also cites Former army Chief Paul Malong maintains a $2 million mansion in the wealthy Nyari Estate in Nairobi, the group adds, stating that Gen Malong was paid about $45,000 a year in his military position.
General Malong also owns two luxury homes in Uganda, The Sentry notes.
Attempts by Equator Magazine to get a comment from South Sudan government officials were futile. Presidential Press Secretary Ateny Wek Ateny was yet to respond to our text messages and emails.
A source at FIA, who spoke on condition of anonymity because they are not authorized to speak for the agency told PML Daily that the trade between Uganda and South Sudan coupled with the porous border in a cash economy enables people to easily invest in Uganda. Some buy land and put up structures to clean up the money.
The loopholes in the law are being exploited to evade the process in the institutions to track and seize property suspected to be proceeds of crime.
The FIA source says the issue of money flowing into Uganda is becoming an international concern. “There are several reports pointing to top South Sudanese nationals investing in the real estates in Uganda that puts the country at a risk should the Financial Action Task Force assess and write to Uganda to check it’s behaviour with a country in conflict,” the source said.
Our source told PML Daily that the construction industry is currently the largest contributor to the country’s GDP, adding that the police is investigating a number of cases but because the people involved are powerful and since the investigation process is long, it takes time.
“Once FIA refers a case to police, it is up to police to forward the case to the Director of Public Prosecution,” says our source.
When contacted, Commissioner of Police Fred Enanga, the Uganda Police Spokesperson said the police have a close working relationship with the FIA.
He says when cases are referred to their Economic Crimes Department in the Assets Tracing and Recovery unit, it coordinates with the office of the Director of Public Prosecutions to ensure suspicious accounts are frozen to carry out investigations.
Enanga declined to comment on the reports that point to Uganda as a destination for illicit money from South Sudan. He requested to read the reports and check their records before commenting on the claims.
But he notes that Uganda is a liberal economy and all incomes are regulated through the stringent measures that Bank of Uganda and commercial banks have come up with to know every source of income from their clients.
His concern meanwhile is the confidentiality clause that banks have with their clients. He says sometimes banks do due diligence with their clients asking them to provide supporting documents for their transactions. The confidentiality clause then shields money launderers and makes investigations difficult since forged documents make the money seem to be from credible sources.
Whereas Enanga agrees that FIA refers cases to them on money laundering, he could not immediately provide statistics of cases they have received and handled for the past four years.
This story was produced by Irene Abalo, for PML Daily. It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation in partnership with The African Centre for Media Excellence.
More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher.