​​Digital Financial Transactions and Cross-Border Corruption in Uganda

In an increasingly digitized financial ecosystem, the rapid adoption of mobile money and online financial services in Uganda has promoted financial inclusion while exposing the country to money laundering (ML) and terrorist financing (TF) vulnerabilities. This study critically examines Uganda's anti-money laundering (AML) and counter-terrorism financing (CFT) framework, drawing on the 2017 and 2023 National Risk Assessment (NRA) reports and qualitative insights from interviews with policy makers, financial service providers and regulators. Using Regulatory Arbitrage Theory, the study explains how criminal networks exploit cross-border regulatory loopholes, particularly in digital financial services, and how inconsistent enforcement creates loopholes for illicit activities in Uganda’s financial system. Key findings show that digital financial platforms, including mobile money and remittance services, provide significant opportunities for illicit financial flows. While Know Your Customer (KYC) measures have improved, weaknesses remain in the monitoring of foreign exchange bureaus, remittance service providers and real estate transactions linked to trade-based money laundering. The NRA 2023 report highlights an increase in predicate offenses such as corruption, tax evasion and mineral smuggling that evade detection due to regulatory fragmentation and limited use of AI-based financial crime detection tools. This study argues for a multi-pronged approach to tackling cross-border financial crime, including advanced digital surveillance tools, tighter regulatory controls and regional coordination. It argues for AI-powered big data analytics to improve the monitoring of suspicious transactions and emphasizes inter-agency cooperation and biometric KYC systems to close loopholes exploited by criminal networks. Uganda’s experience illustrates the dual challenge of promoting financial inclusion while combating cross-border financial crime - a struggle shared by many developing countries with nascent legal frameworks. By analyzing Uganda’s efforts to close regulatory gaps through enhanced anti-money laundering and counter-terrorist financing tools, this study offers transferable lessons for countries with expanding digital economies and demonstrates that context-specific approaches can strengthen global anti-corruption efforts in resource-constrained environments.