The UAE in a bid to curb money laundering issues has taken steps to tackle financial, organized, and funding terrorist crimes. The UAE government has successfully maintained an anti-money laundering (AML) system as a means to prevent the possibility of money laundering and financing of terrorists. The fight to combat money laundering dates back to 2002 with the starting Law which was Federal Law No. 4 on Criminalization of Money Laundering.
The Objectives of Anti-Money Laundering are;
- Examining Licensed Financial Institutions (LFIs)
- Identifying relevant threats, vulnerabilities, and emerging risks concerning the UAE’s financial sector
- Ensuring adherence to the UAE’s AML rules
There are principal Federal Laws that have been enacted that are currently in existence which serve as the foundation for the country’s Anti-money laundering (AML) and terrorism financing efforts which are;
- Federal Decree No. 20 of 2018 on Anti-Money Laundering, Combating the Financing of Terrorism and Financing Illegal Organisations (as amended) (AML Law)
- Cabinet Resolution No. 10 0f 2019 Concerning the Implementing Regulation of Decree Law No. 20 of 2018 on Anti-Money Laundering, Combating the Financing of Terrorism and Financing of Illegal Organisations (Cabinet Resolution); and
- Federal Penal Law No. 31 of 2021 (Penal Code)
The Laws have stipulated what makes one guilty of knowingly committing one of the following crimes of AML;
- Transferring proceeds of crime whose purpose is to conceal its illegal origin
- Masking the true state, location, origin, way of disposal or movement of the ownership thereof
- Making use of, or having such proceeds in one possession
- Abetting the perpetrator of the predicate offense to evade punishment
Who is Regulated by the AML-CFT?
International and National companies that operate within the UAE are required by the UAE government to abide by the AML-CFT Law. The categories of companies that must follow this Law are three (3) which are;
- Financial Institutions
- Designated Non-Financial Businesses and Professions
- Non-Profit Organizations
A financial institution that is involved in any of the below-mentioned financial activities on behalf of its customers must comply with the AML-CFT and they are;
- They provide private banking services, credit facilities, and brokerage services
- Offering currency exchange and money transfer services, virtual banking services, and electronic payments for retail and digital money.
- Operating, trading, investing, options contracts, future contracts, interest rate and exchange rate contracts, and other negotiable financial instruments
- Accepting deposits and other funds that are paid by the public, including deposits in accordance with Islamic Law
- Participating in issuing and providing financial services related to saving and managing of funds of all kinds
Designated Non-Financial Businesses and Professions
The kind of businesses under this category of financial institutions are;
- Lawyers, notaries, and other independent legal professionals and accountants when executing financial transactions for their clients or customers
- Brokers and real estate agents
- Dealers in precious metals and precious stones in carrying out any single monetary transaction or several transactions that is equal to or exceed AED 55,000
- Providing corporate services and trusts upon the performance of a transaction on behalf of their client
This category has very limited obligations under the Law as they are a group that is set to continue for a temporary or permanent period for a non-profit purpose.
The Specific AML Compliance Requirements for Covered Category of Institutions
According to the Laws and regulations of AML, the above categories of financial institutions are subject to wide-ranging AML compliance obligations which are;
- Conducting customer and enterprise-wide risk assessments, including assessing, identifying, and understanding ML and TF risks;
- identifying and verifying customer identities and conducting customer due diligence (CDD) which should include simplified, ongoing, and enhanced due diligence
- adopting a risk-based approach to identifying and managing ML risk and conducting enhanced risk mitigation measures where higher ML risks are identified
- designating a compliance officer with requisite qualifications and expertise
- developing and implementing risk-based compliance policies, procedures, systems and controls and monitoring the implementation, adequacy and effectiveness of the measures
- enforcing indicators to identify suspicious transactions, reporting any of such suspicious transactions, and cooperating fully with the legal authorities
- monitoring and screening transactions to identify any suspicious transactions
- swiftly applying the directives of competent authorities for implementing United Nations Security Council decisions
Penalties for Failing to Comply with AML Rules
A financial institution that fails to comply with AML compliance obligations in the UAE is subject to either criminal or civil penalties or both depending on the gravity of the non-compliance.
The administrative penalties that can be imposed by the competent authorities are;
- Fines that are between AED50,000 and AED5 million per violation
- A warning in writing
- Revocation of a company’s license to practise
- Prohibitions on working in the regulated sector
- Arresting managers, members of the executive or supervisory management or board of members of the entity who are found to be liable for non-compliance
- Limiting the powers of board members or members of the executive or supervisory management of the company
Criminal Consequences and Penalties
For an entity to become criminally liable for the offense of failing to comply with AML-CFT rules, there are consequences which are;
- The crime is committed through a Non-Profit Organization
- The entity abused the influence or power vested in them with respect of their profession
- Reoffending has occurred
The crime is committed through an organized criminal group
Failure to inform or report to the appropriate authority is punishable by imprisonment and/or a fine of AED100,000 to AED1 million.
Any entity or person who signals a person that suspicious transactions are under review may be sentenced to imprisonment for at least one year and a fine of AED100,000 to AED500,000
Statute of Limitation
When there is a violation of the cabinet rules regarding AML, there is no statute of limitation provided by the Law that is, the case can be visited at any time to decide it.
With the UAE government introducing regulations in order to ensure a higher level of AML-CFT actions and compliance, it has become pertinent for financial institutions to adopt internal procedures to identify suspicious transactions and remain compliant with all the relevant AML regulations.
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