The Effect of Mobile Money in The Banking Sector in Uganda; A Legal Analysis

ABSTRACT :
obilc money transactions today, have taken over the payment .systems ranging.fi-om offerings such as air time purchase, person to person, and person to business money tramjers. And as such mobile money is considered by many as another mode in the banking system; this has been through commercial banks- partnering with mobile money in the modal which are mandated by law to maintain an account .for the "cash float" ensuring that a regulated .financial institution holds the physical backed the issued e-money. The impact of mobile money is paramount and this has been mani.fested.for years since its introduction in 2009 in the Ugandan banking .system. The Ugandan economy is gro·wing due to mobile money contrihution. Nevertheless the challenges !hereto cannot be ignored as !hey sland to be realized with the growing economy and this has jitrlher created a legal gap since the existing laws do no/ adequately accommodate the new product on the market. But the mobile money contribution ~~· a.fi:1ct I hat raises issues.

TABLE OF CONTENTS 

DECLARXI'ION .................................................................................................................................... ii 

APPROVAL .......................................................................................................................................... iii 

OED JC A TION ....................................................................................................................................... iv 

ACKNOWLEDGEMENT ....................................................................................................................... v 

ACRONYMS ......................................................................................................................................... vi 

LIST OF STATUTES ........................................................................................................................... viii 

TiI E OF CONTENTS ....................................................................................................................... ix 

ABSTRACT .......................................................................................................................................... xii 

CHAPTER ONE ..................................................................................................................................... 1 

THE GENERAL INTRODUCTION .................................................................. I 

1.0 Introduction ............................................................................................... 1 

1.1. Background ............................................................................................... 1 

1.2 Purpose of the Study ...................................................................................... 6 

1.3. Statement of the problem ............................................................................. 7 

1.40bjectives ...................................................................................................... 7 

1.4.1 General objective ....................................................................................... 7 

1.4.2 Specific objectives ...................................................................................... 7 

1.5. Scope of the study ..................................................................................... 8 

1.6. Significance ofthe study ............................................................................ 8 

1.7. Hypothesis ................................................................................................. 9 

1.8. Methodology ............................................................................................. 9 

1.9. Literature review ....................................................................................... 9 

1.1 0. The risks involved in mobile banking ...................................................... 14 

1 . 1 1 . Synopsis .................................................................................................. I 7 

2.1. The Operation of a Hand Set ................................................................... 18 

2.1.2. Mobile Money Services ........................................................................... 22 

ix 

2.2. The Mobile Money ecosystem ................................................................. 26 

2.2.1. The bank .................................................................................................. 26 

2.2.2. The mobile operators ............................................................................... 28 

2.2.3. Merchants ................................................................................................ 31 

2.2.4. Businesses ............................................................................................... 31 

2.2.5.Equipment manufacturers and platform providers ................................... 32 

2.2.6. Mobile money uset's ................................................................................. 32 

2.3. Mobile money experience ........................................................................ 33 

2.3.l.Kenya ...................................................................................................... 33 

2.3.2. South Africa ............................................................................................ 34 

2.3.3.Philippines ............................................................................................... 35 

2.4. The economic environment; Uganda ....................................................... 35 

2.5. Convenience; a broad advantage .............................................................. 37 

VARIOUS LAWS AND INSTITUTIONS GOVERNING THE MOBILE 

MONEY OPERATION IN THE UGANDAN BANKING SYSTEM ............... 38 

3.1. The bank of Uganda Act Cap 51 .............................................................. 38 

3 .2. The Financial Institutions Act 2004 ......................................................... 3 9 

3.3. The Foreign Exchange Act, 2004 ............................................................. 40 

3.4. The Anti-money Laundering Act, 2013 ................................................... 40 

3.5. The electronic signatures Act, 20 I I ......................................................... 4 I 

3.6. The Communications Act 2013 ............................................................... 42 

3.7. The Computer Misuse Act 2011 .............................................................. 43 

3.8. The Regulation oflnterception of Communications (RIC) Act 2010 ....... 43 

3. 9. The Electronic Transactions Act (20 I l ) ................................................... 44 

3.10 The Uganda Communications Regulatory Authority Bill (20 12) ............. 45 

3. I I. The consumer protection guidelines June 20 11 ........................................ 46 

X 

3.12. The Financial institution (anti-money laundering regulations) SI 

supplement 2010 no 46 ..................................................................................... 46 

17Je international institutions that relate to Telecom services ........................... 4 7 

3.13 The International Telecommunications Convention (ITC) ....................... 4 7 

3.14. International Telecommunications Union (ITU) ...................................... 48 

3.2The institutions based in Uganda that regulate the MNOs and the partnership 

with the Banks ................................................................................................... 49 

3.2.1. Uganda Communications Commission (UCC) ........................................ 49 

3.2.2. The Uganda ICT Consumer Protection Association (UICPA) ................. 51 

4.1.1.Fraud ....................................................................................................... 52 

4.1.1. Determine Risk appetite: The Foundation of Risk Management .............. 55 

4.1.2. Identify and Assess key Risks: Understanding the Potential of Fraud ...... 56 

4.1.3. Establish Effective Controls: Mitigating the Risk of Fraud ...................... 58 

4.1.4. Monitor and review risk Management strategy: ensuring long-term 

effectiveness ..................................................................................................... 61 

4.1.5. How can fraud be minimized .................................................................. 63 

4.2. Issue of Security ..... , .................................................................................. 63 

4.2.1. Tips on how to keep the premises safe: .................................................... 64 

4.3. Financial regulations and legislation ........................................................ 65 

4.4. User experience ....................................................................................... 66 

4.5. Money laundering issue as one of the prevalent fi·aud .............................. 67 

SUMMARY. CONCLUSlONS AND RECOMMENDATlON .............................................................. 70 

5.2. Conclusions ............................................................................................. 70 

5.3. Recommendations ................................................................................... 72