The Role of Banks in Preventing and Detecting Ponzi Schemes: An Exploratory Study of Regulatory Frameworks, Risk Management Strategies and Collaborative Mechanism in Uganda

Abstract

This research examines the critical role of commercial banks in Uganda in preventing and detecting investment and financial crime, with a specific focus on Ponzi schemes. It details the legal and regulatory obligations governing commercial banks in Uganda, including the Anti-Money Laundering Act and the Financial Institutions Act, and the roles of the Financial Intelligence, the Capital Markets Authority and the Bank of Uganda. The research outlines the procedures and technologies employed by banks, such as customer due diligence and transaction monitoring systems, and the importance of staff training in recognizing and reporting suspicious activities. Challenges faced by banks, including the evolving nature of financial crime and resource constraints, are discussed, along with best practices and the potential of AI and machine learning in enhancing detection capabilities. The research also highlights the crucial collaboration between banks, regulatory bodies, and law enforcement agencies. The research emphasizes the vital role of banks and recommends enhancing technological capabilities, strengthening staff training, improving customer awareness, fostering greater collaboration, and addressing regulatory challenges to boost the fight against financial crime in Uganda.