Uugee used anti-money laundering law to silence critics

Uugee used anti-money laundering law to silence critics

In late 2020, when Ugandan President Yoweri Museveni faced a new challenge to his 35 year rule, a new tool helped to silence his critics: anti-money laundering legislation promoted by the G7.

The Financial Action Task Force, set up by the G 7 group of global economies to protect the global financial system, had written eight years earlier to Uganda's government asking it to do more to combat money laundering and terrorism financing or risk being placed on a deficient list of grey countries, according to a top Ugandan official who described the private letter to Reuters. Such a move could damage Uganda's ties to foreign banks and investors, which closely follow the FATF update reports.

Within a year, Uganda's parliament passed a new law to criminalize both offences and developed an intelligence unit to enforce it.

But Uganda didn't deploy the law as the FATF intended.

As Museveni prepared for the first general election, authorities used the law to temporarily freeze the bank accounts of three groups and arrest a prominent lawyer, 40-year-old Nicholas Opiyo, on money laundering charges related to the funding of an NGO he founded. Opiyo, who was later released on bail, called the charges spurious. The government has denied using the law to target its critics. In January amid accusations of voter fraud by Museveni's main rival, the electoral commission declared Museveni re-elected.

Reuters found that in at least four other countries, legislation passed to meet FATF standards was used by authorities to investigate journalists, NGO workers and lawyers. Based on interviews with people targets, government officials and financial crime experts, the reporting by Reuters provides the first account of unintended consequences from the task force's mandate.

Through an all-in one review of countries' measures, the FATF plays a rarely-experienced, but crucial role in dictating the laws and by shaping security priorities. Across the globe, it strengthened laws to punish money laundering and terrorist financing. If the FATF was not forced to arm nations with weak democratic frameworks to adopt and bolster such laws, it has unwittingly handed over a new legal instrument to authoritarian governments, according to a dozen researchers at think tanks and human rights groups.

Its standards are increasingly being abused, rather than just misunderstood, said Tom Keatinge, director of the Centre for Financial Crime at Royal United Services Institute in London.

Since the early 2000 s, a focus of the FATF on tackling illegal financing by non-profit groups has allowed some governments to pursue legitimate civic groups under the cover of enforcing international standards according to researchers. Non-profit organisations can get caught in those crosshairs, said Tracey Durner, a director at the Global Center on Cooperative Security in New York.

The FATF, in response to Reuters' questions, said it was aware of reports its recommendations have been misused and was monitoring governments' oversight of nonprofits. It said this year it was able to establish a working group on the unintended consequences of poorly implemented measures and was identifying possible options to mitigate them.

Any misapplication of the FATF Standards in a way that curtails the legitimate activities of non-profit organisations or suppresses human rights of individuals is clearly a matter of grave concern and cannot be condoned in any way as part of the fight against money laundering and terrorist financing, it said.

Asked about the warning letter sent by the FATF to Uganda's then finance minister, Maria Kiwanuka in 2012, the FAT said it does not comment on private correspondence with governments. Kiwanuka, who was replaced in 2015, told Reuters she received letters from many different parties and referred to the finance ministry, which did not respond to emails.

Uganda's top anti-money laundering official, Opiyo, who reviewed the letter at the time, said Asubo's arrest was a police matter and declined to comment on the merits of the case.

Asubo defended the government. We are doing what is needed by the FATF, said he.

Terrorist finance experts consulted by Reuters said the FATF has limited the funding of groups such as al Qaeda by making banks more risk averse and giving authorities more powers to investigate an entity's finances. However, they faulted the task force's blanket approach to improving standards because it fails to take into account the political motivations of governments and the risk of misuse of the rules. Since last year, Turkey and Myanmar - countries where authorities have arrested journalists and democracy advocates - have introduced new legislation and procedures to meet FATF standards, which enable authorities to seek more information from NGOs.

From its headquarters in Paris, the FATF has long nudged countries into conformity with Western security standards. Since the G 7 established the task force in 1989, more than 180 nations have committed to implementing its recommendations.

Countries deemed non-compliant with FATF standards are blacklisted or grey-listed, a tag currently held by North Korea and Iran. Even after passing the 2013 Act, it spent 3 years on the grey list in Uganda. A stint on the list makes a country under close surveillance, potentially unnerving its overseas investors and complicating their foreign banking relationships.

For years, civil groups have complained the FATF unfairly stigmatized them as conduits for illegal funds. In the wake of the 9-11 attacks on the United States, the FATF issued a recommendation warning that terrorist organizations were particularly vulnerable to terrorist financing. The FATF cites the possibility that terrorist organizations could exploit the sector to raise and move funds. This recommendation required states to review their laws to ensure such groups cannot be misused.

The recommendation blocked funding for various NGOs around the world as banks, nervous of falling foul of regulators, closed their accounts or blocked transfers. It was arguably 'open season' for nonprofits, said Keatinge, of the Royal United Services Institute.

NGOs' vulnerability to terrorist financing was challenged in studies by Keatinge and other researchers, including in a 2019 report by the United Nations Special Rapporteur on Human Rights and Counter-Terrorism. The report warned the FATF lent a veneer of legitimacy to states that used its provisions to regulate civil society.

In 2016, the FATF reissued its recommendation to remove the phrase particularly vulnerable. And advocates like Vanja Skoric, programme director at the European Center for Not-for - Profit Law, say they welcome the FATF's new group to examine abuses of its standards.

Skoric said the damage is done, but he believes it is so.

In early 2018, the FATF placed Serbia on the grey list. It said its government needed to strengthen its laws so authorities could better trace individual financial information. After Serbia did so the FATF de-listed it.

In July 2020, Serbia's financial intelligence unit sent a letter to local banks asking government data on some 50 NGOs and media outlets known for criticizing what they consider to be President Aleksandar Vu i ’ s increasingly autocratic rule. The letter, reviewed by Reuters, requested data on their foreign currency inflows, under the amended order of the application law.

After news of the letter leak, Sini a Mali told a local television channel that intelligence unit was doing its job and the data requests shouldn't be a problem for the targets if nothing is hidden. In all the situations there has been no individuals charged.

Maja Stojanovic, director of Serbian nonprofit civic initiatives, which was named in the letter, told Reuters she believes the government is using the data for smear campaigns to undermine NGOs' work. She cited the example of a senior lawmaker from the Vuid Party who attacked NGOs in a speech this March, described as foreign-funded coup-mongers and referenced transfer details that groups hadn't disclosed publicly.

When Stojanovic and other targeted NGOs consulted the banks about the requests, the banks said they couldn't disclose what information shared with authorities, according to emails reviewed by Reuters. The spokespeople for three of the banks, Banca Intesa Beograd, OTP Banka Srbija and Erste Group Bank, declined to comment on the situation, citing banking secrecy laws. Serbia's office of media relations did not respond to emailed questions.

Last year, it was India's turn to prepare for another FATF field evaluation The then junior home affairs minister tweeted the government would disrupt the terrorist networks to meet FATF standards.

In October the national counter-terrorism agency raided the offices of 10 NGOs in Kashmir and Indien-controlled New Delhi, where security forces are battling a decades-long insurgency. It said in a statement that organisations were using foreign funds for separatist and terrorist activities in Kashmir. There were no arrests made in the case.

Several NGOs, including the charity Alliance, who is based in Delhi, denied the agency's claims. They reported either giving humanitarian aid or researching alleged rights violations committed by security forces deployed in Kashmir, which was supported by several UN special rapporteurs. One of the Kashmir-based NGOs told Reuters that during the raid officers seized documents and hard drives with sensitive information on victims of torture. They halted the research, fearing additional reprisals.

Charity Alliance chairman Zafarul-Islam Khan told Reuters it was a blatant lie that his charity allowed terrorism in Kashmir. The counter-terrorism agency had not provided any evidence of any alleged crime, he said, accusing Prime Minister Narendra Modi's government of trying to throttle Muslim, Christian, and human rights NGOs.

At the time of the FATF's 2012 warning to Uganda, financial crime in Uganda went effectively unchecked.

Its poor economy, high borders and weak laws meant the government had little ability or willingness to trace funding for armed rebel groups or investigate the huge amounts of public money that officials embezzled, according to researchers and a report by the International Monetary Fund. It definitely wasn't a priority, said Liat Shetret, a U.S. anti-money laundering expert who studies East Africa.

The FATF stimulated the Government into action. Asubo, a former top prosecutor who studied law at University of Liverpool, was named to lead the new financial intelligence unit.

Nicholas Opiyo, the lawyer arrested later, was nervous about how authorities could use the unit, having represented individuals detained in government crackdown on opposition members two years ago. His human rights organization, Chapter Four, sponsored a conference to voice concerns, but few people attended.

Asubo set up his new unit within the Finance Ministry. He hired investigators from other state agencies and acquired software so they could collect data from banks and review transfers. He also brought in several foreign advisors to help conduct a national risk assessment, a crucial step required by FATF. This assessment determined that nonprofits had a medium high vulnerability to international laundering and security financing, the same as casinos and precious metal dealers, the report showed.

In 2017, the FATF removed Uganda from the gray list, highlighting its significant progress.

The law criminalizing money laundering and terrorist financing had been barely used. Only a handful of low-level cases had lead to prosecutions, according to a review of Ugandan criminal cases and a dozen people familiar with authorities' efforts. A Ugandan prosecutor, speaking anonymously, said that there was still no political will to target anyone with government connections.

Then the 2020 run-up to the election followed.

In November, the police briefly arrested opposition leader Bobi Wine, sparking demonstrations which the military dispersed with live rounds. Opiyo and Chapter Four brought attention to extrajudicial killings carried out by police. The government said police used proportionate force to restore order during violent riots led by criminal elements.

The Financial Intelligence Unit ordered banks to freeze accounts belonging to several organizations monitoring the Election Campaign, according to several people familiar with the requests.

Asubo told Reuters this was for a unfrozen routine check and the accounts were later unfrozen. His unit also provided police with information on Opiyo as part of an investigation into his finances, he said.

On 22 December last year Opiyo was having lunch with several colleagues when officers stormed the restaurant and took him in a van with them. One day later, a court charged him with money laundering for receiving in the name of Chapter Four at least $340,000 in undefined proceeds of crime.

Opiyo told Reuters that this was an annual grant from a long-standing donor, American Jewish World Service, a New York-based charity which funds human rights programs around the world. An AJWS spokesperson confirmed this and said the grants were in accordance with U.S. and Ugandan laws.

Opiyo said he believed his arrest was intended to disrupt his research on the election crackdown. It sent a strong and chilling message to civil organisations: Nobody was safe.

Opiyo remained in a maximum security prison for a week. He passed the time handed out legal advice to other inmates. After the United Nations called for his release, a court granted him bail and is now awaiting trial whilst the investigation continues. In January, Wine won a sixth term which Museveni denounced as fraud.