Compliance Guidelines:

Compliance Regulations in UAE

The UAE, which serves as the financial center of the Middle East, has a number of alluring free trade zones that draw major corporations and have a considerable positive impact on the country’s economic growth. The existing environment in the nation, however, is used by criminals to perpetrate crimes like money laundering, which poses a serious threat to the stability and security of the financial system. This emphasizes the significance of putting Anti-Money Laundering (AML) laws into place to stop this fraud in the nation.

Regulatory Bodies in UAE

The regulatory bodies work collectively to combat money laundering and terrorist financing activities in the UAE, ensuring that businesses and financial institutions adhere to AML laws and maintain effective compliance measures. It is essential for entities operating in the UAE to be aware of and comply with these regulations to prevent money laundering and financial crimes. In the United Arab Emirates (UAE), several major regulatory bodies are responsible for dealing with anti-money laundering (AML) and its regulations:

Central Bank of the United Arab Emirates (CBUAE):
CBUAE is the primary regulatory authority overseeing financial institutions in the UAE. It plays a vital role in implementing AML regulations and guidelines within the banking sector.

UAE Ministry of Economy:
The UAE Ministry of Economy is involved in setting and enforcing AML regulations for non-financial businesses and professions in the country.

Financial Intelligence Unit (FIU):
The UAE FIU is responsible for collecting and analyzing reports on suspicious transactions and activities related to money laundering and terrorist financing. It operates under the jurisdiction of CBUAE.

Dubai Financial Services Authority (DFSA):
DFSA regulates financial services firms operating within the Dubai International Financial Centre (DIFC). It has its AML regulations and guidelines.

Abu Dhabi Global Markets (ADGM):
ADGM is another financial free zone in the UAE with its regulatory framework, including AML regulations, applicable to firms within its jurisdiction.

Meydan Free Zone:
This free zone has its AML and Know Your Customer (KYC) laws and regulations.

Anti-Money Laundering Legislative Framework

Federal Decree-Law No. 20 of 2018

The nation’s legislative and legal framework was developed in accordance with Federal Decree No. 20 of 2018 (PDF, 500 KB) on Anti-Money Laundering and combating the Financing of Terrorism to ensure conformity with international standards on anti-money laundering and combating the financing of terrorism. the following:

• Combating methods of money laundering.
• Create a legal framework that aids the concerned authorities with fighting money laundering and crimes related to it.
• Combat the funding of dubious groups and terrorist activity.

Article 2:
According to the Decree-Law, a person who willfully engages in one of the following acts while knowing that the money was obtained through criminal activity is guilty of money-laundering:

• Transferring or moving the proceeds of crime with the goal of hiding or masking their criminal source.
• Concealing or hiding the real nature, source, location, method of disposition, route, or rights with regard to any funds or the ownership thereof.
• Obtaining, holding, or employing such proceeds.
• Helping in the predicate offender’s escape from punishment.

According to the law, money laundering is a separate offense from the predicate crime, and the sentence meted out to a predicate offender does not shield that individual from punishment for money laundering.

Article (3): Financing Terrorism & Illegal Organizations Reference: Provisions of Federal Law No. (3) of 1987 and Federal Law No. (7) of 2014

• Financing Terrorism: Committed by anyone intentionally undertaking: a. Specified acts in Article (2) if aware proceeds belong to or are intended for terrorist organizations, persons, or acts. b. Providing, collecting, preparing, or obtaining proceeds to be used in terrorism or on behalf of terrorist entities.
• Financing Illegal Organizations: Committed by anyone intentionally undertaking: a. Specified acts in Article (2) if aware proceeds belong to or are intended for illegal organizations or members. b. Providing, collecting, preparing, or obtaining proceeds to benefit illegal organizations or members.

Article (4): Legal Person’s Responsibility

• Legal entities can be criminally responsible if crimes are committed in their name or on their account.

Article (5): Regulation on Freezing Suspicious Funds Reference: Executive Regulation of the present Decree Law

Authority given to the Governor to freeze suspicious funds for up to 7 working days, renewable by order of the public prosecutor.

• Public prosecution and competent court powers over suspicious funds.
• Prohibition on trading or disposing such funds.
• Freezing orders executed through the Central Bank.
• Grievance procedures regarding freezing/seizing decisions.
• Timeline for grievance resolution set at 14 business days.
• Management and disposal of seized assets.
• Executive Regulation will define rules for implementing this Article.

Article (6): Instituting Criminal Proceedings Reference: Federal Decree-Law No. (26) of 2021

• Criminal proceedings are only initiated by the public prosecutor or delegate. Measures to protect intelligence and individuals are also highlighted.

Article (9): Establishment of the Financial Intelligence Unit (FIU) by Central Bank Reference: Federal Decree-Law No. (26) of 2021

• Roles and responsibilities of the FIU including requesting information, international cooperation, establishing a database, and other competencies.

Article (10): Collaboration with the FIU

• Public prosecution can seek FIU’s opinion on reports related to money laundering and terrorism financing. Law Enforcement Authorities will handle suspicious transaction reports from the FIU.

Article (15): Reporting Suspicious Transactions

• Mandatory Reporting: Financial institutions and virtual asset service providers must report any suspicious transactions to the Unit and provide a detailed account.
• Exemptions: Legal professionals like lawyers and notaries are exempted if the information is obtained under professional confidentiality.
• Guidelines: The Executive Regulation will provide more specific rules and controls on reporting.

Article (16): Obligations and Due Diligence

• Identifying Risks: Institutions should identify and continuously assess risks related to crimes.
• Due Diligence: Necessary measures should be taken considering various risk factors.
• Prohibitions: Transactions under pseudonyms, anonymous, or fictitious names are not allowed.
• Internal Controls: Develop and update internal policies to manage identified risks.
• UN Directives: Implement directives from competent authorities related to terrorism and weapon proliferation.
• Record Keeping: Retain all records of transactions and make them available upon request.

Cabinet Resolution No. (10/R.M) of 2019

Cabinet Resolution No. (10/R.M) of 2019 concerns the Executive Regulations of Federal Decree Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) in the United Arab Emirates (UAE). This resolution plays a pivotal role in providing detailed guidelines and instructions for implementing the AML/CFT law in the UAE. Key points related to this resolution include:

Article 4: Identification and Mitigation of Risks 

Requirements for Financial Institutions and DNFBPs:

• Assess and understand crime risks.
• Consider factors like customer profiles, geographic areas, and transaction types.
• Document and update risk assessments.

Mitigate identified risks by:

• Developing internal policies and procedures.
• Applying Enhanced Customer Due Diligence (CDD) for high risks.
• Applying simplified CDD for low risks unless crime is suspected.

Article 5: Customer Due Diligence (CDD) Requirements 

• Financial Institutions and DNFBPs must:
• Undertake CDD to verify the identity of the Customer and Beneficial Owner.
  • Do so before establishing business relationships or transactions.
  • In low-risk scenarios, complete verification after the relationship begins.
• Manage risks when verification is incomplete and customers benefit from the relationship.

Article (15) Politically Exposed Persons (PEPs) – Foreign PEPs

Financial Institutions and DNFBPs (Designated Non-Financial Businesses and Professions) must:

• Implement risk management systems to determine if a Customer or Beneficial Owner is a PEP.
• Obtain senior management approval prior to initiating or continuing a business relationship with a PEP.
• Take measures to establish the source of funds of Customers and Beneficial Owners classified as PEPs.
• Conduct advanced ongoing monitoring of the relationship with PEPs.

Domestic PEPs & Prominent International Individuals

• Financial Institutions and DNFBPs are required to determine if a Customer or Beneficial Owner falls into these categories.
• Apply measures similar to those for foreign PEPs, like senior management approval, source of fund determination, and enhanced monitoring, especially in high-risk relationships.

Beneficiary of Life Insurance Policies Related to PEPs

Financial institutions must:

• Identify if the beneficiary or Beneficial Owner of life insurance or family takaful insurance policies is a PEP.
• Inform senior management before making a policy payout or exercising any rights related to such policies if the beneficiary is a PEP.
• Thoroughly evaluate the business relationship and consider submitting a suspicious transaction report to the appropriate Unit.

Article (16): Suspicious Transaction Reports (STRs) 

Financial Institutions and DNFBPs are mandated to:

• Develop and maintain indicators to detect suspicions related to the occurrence of a Crime.
• Continuously update these indicators to adapt to the evolving and diverse methods used in committing such crimes.
• Adhere to directives and instructions issued by Supervisory Authorities or the Financial Intelligence Unit (FIU) in this context.

Central Bank of the UAE (CBUAE) Circulars

The Central Bank of the United Arab Emirates (CBUAE) issues circulars and guidance related to Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) to ensure financial institutions’ compliance with AML/CFT regulations. These circulars and guidance documents play a crucial role in establishing and maintaining effective AML/CFT measures in the UAE. Some notable circulars and guidance documents issued by CBUAE include:

• CBUAE provides comprehensive guidance on AML/CFT supervision, outlining the regulatory requirements and expectations for financial institutions operating in the UAE in their efforts to combat money laundering and terrorist financing. CBUAE issues circulars to provide guidance and directives to financial institutions.
• Circulars may specify requirements for Enhanced Due Diligence (EDD) for higher-risk customers. Guidance on reporting suspicious transactions and maintaining records.
• CBUAE has issued guidance on the use of digital identification for customer due diligence, aligning with modern technologies to enhance AML efforts.
• CBUAE has published extensive AML/CFT guidelines for financial institutions, providing detailed instructions on risk assessments, customer due diligence, and reporting obligations.
• CBUAE offers guidance to licensed financial institutions on the risks associated with politically exposed persons, helping them identify and mitigate potential AML/CFT risks.

Dubai International Financial Centre (DIFC) AML Regulations

DIFC has a comprehensive regulatory framework for AML and Counter-Terrorist Financing (CTF) in place. These regulations are designed to prevent money laundering and terrorist financing activities within the DIFC.

Non-Financial Anti-Money Laundering/Anti-Terrorist Regulations

DIFC has specific regulations applicable to both financial and non-financial businesses operating within its jurisdiction. These regulations require entities to implement AML and CTF measures, conduct due diligence on customers, and report suspicious activities.

Compliance Requirements

The DIFC AML regulations set out compliance requirements for businesses operating in various sectors within the financial center. This includes guidelines on customer due diligence, risk assessments, and reporting obligations.

AML Guidelines

In addition to regulations, DIFC provides AML guidelines and resources to assist businesses in understanding and complying with AML requirements effectively.

Regulatory Oversight

The Dubai Financial Services Authority (DFSA) is the regulatory authority responsible for overseeing AML and CTF compliance in the DIFC. They provide guidance and supervision to ensure entities’ compliance with these regulations.

International Standards

DIFC aligns its AML regulations with international standards and best practices to maintain the highest standards of financial integrity.

References:

1. Dubai Financial Service Authority
2. Executive Office for Control and Non-Proliferation
3. United Arab Emirates Ministry of Economy
4. Dubai Financial Service Authority