The International Monetary Fund (IMF) is urging Uganda to step up its efforts to be removed from the Financial Action Task Force (FATF) grey list of jurisdictions under increased monitoring.
The IMF is concerned about measures yet to be taken to improve the country’s central bank supervisory effectiveness and warns that the East African country’s inclusion on the grey list could jeopardise correspondent banking relationships and destabilise the financial system.
The FATF meanwhile has said it will “consider next steps” if Uganda fails to show sufficient progress in its anti-money laundering and counter financing of terrorism (AML/CFT) operations by October 2023.
Strengthen AML/CFT supervision
The IMF noted in Uganda’s fourth review under the extended credit facility arrangement – which provides medium-term financial assistance to the country – that the Bank of Uganda (BoU) needs to sustain progress in strengthening its AML/CFT supervision.
While the BoU has started developing and implementing AML/CFT risk based supervision tools for banks, the IMF says the central bank needs to further enhance financial sector governance and financial stability.
The BoU is now expected to formulate policies and procedures to guide the implementation of supervisory sanctioning power provided under Uganda’s AML regulations for non-compliance with AML/CFT requirements by banks by the end of March 2024.
Uganda was placed on the FATF grey list after it failed to complete its action plan, which fully expired in May 2022.
In June 2023 the global financial watchdog urged Uganda to swiftly demonstrate significant progress in completing its action plan by October 2023 or the FATF “will consider next steps if there is insufficient progress.”
The IMF has underlined the view of the task force by reporting Uganda’s “slow progress on [its] action plan agreed with FATF for jurisdictions under increased monitoring.”
This could adversely impact corresponding banking relationship and stability of the financial system according to the IMF, which is urging Uganda to accelerate efforts to complete the action plan items agreed with FATF, including by ensuring strong coordination among relevant stakeholders.
Uganda’s Fourth Review under the Extended Credit Facility Arrangement can be downloaded from here.
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