Anti-Money Laundering in the UAE -AM Audit | Audit Accounting Firm in Dubai
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2021/09/16

Anti-Money Laundering in the UAE

Asma Sajid

Every country has faced problems related to money laundering, but measures are being taken for avoiding crimes related to finance terrorism and the ones that are organized. In the interests of protection against the potential to launder money and funding for terrorism, the government of UAE preserves a robust system for anti-money laundering (AML). Efforts to be able to monitor cash movements via the financial system of the UAE have been made by the government of the UAE (UAEG) since 2001 and to participate in international actions against terrorist finance.

Money Laundering

Have you ever played the traditional shell with three cups and a ball where anyone conceals the ball, and where is the ball hidden? Do you have to guess? It is difficult to determine which cup contains the ball below it once the cups are flipped. If you discover that you are incorrect, it may always be a surprise! Money laundering is a criminal strategy that can work in the same way, but it does not require a ball rather the concealment of money.

Laundering money is a technique of covering up money received unlawfully. Money washing works by moving money into sophisticated and intricate financial operations that trick anyone who can track and check activities. The aim is to prevent the original person known as the washer from being identified. But the money is eventually returned to the launderer after the complex operation.

Laws Concerning AML

The UAE has passed two laws, which provide the basis for counter-terrorism funding (CTF) and anti-money Laundering operations in that country: The first one is “Law No 4/2002”, which is specifically formed to prevent money laundering. The second law is “Law No 1/2004” which is created to prevent terrorism.

The legislation formed against money laundering attempts to prevent this issue, however, the “administrative regulation No 24/2000” offers guidance on the monitoring of money laundering activities by financial institutions. This legislation mandates the rigorous Know Your Customer (KYC) standards of currency exchange businesses, financing firms, banks, and other financial organizations working in the country. Furthermore, for all transactions above $545 in the exchange households and all non-account holders’ banking transactions over $10,900, financial organizations must verify a client’s identification and keep track of their transactions (containing the originator’s and beneficiary’s names and addresses). The Regulation outlines the methods of identifying individuals and jurisdictions to be followed, the kind of papers to be submitted, and regulations on the records of customers to be kept in the institution file. Additional requirements of Regulation 24/2000 mandate the retention of client records for at least five years and demand regular updates for as long as this account is active.

Guidelines Against Money Laundering

The UAE recently issued AML and CFT instructions to raise awareness of the need of adhering to financial fraud legislation. In April 2021, the National Committee on Counter-Money Laundering, Terrorism Financing, and Illegal Financing (NAMLCFTC) issued Guidelines for Financial Institutions, Non-Financial Enterprises, and Operations. The recommendations should be made public on the NAMLCFTC and other websites of regulatory organizations, to enhance understanding of these requirements and to ensure that licensed businesses act.

Scope of the New Guidelines

Six risk assessment studies were also accepted by the Committee on Terrorism Finance, Trade-Oriented Cash Laundering, Legal Misuse, Non-Profit, Jurist, and Gold Sector reports. The studies seek to harmonize legislative and operational frameworks in the UAE, increase awareness of the different risk types and promote collaboration between regulatory bodies. This action is part of the ongoing approach to financial crime within the UAE.

Penalties in Case of Noncompliance

The Central Bank claimed that it has provided “ample time” for all banks operating in the country to correct any deficiencies. It has been made clear that to achieve and sustain high levels of compliance with the AML and CFT, it will continue to work closely with all financial institutions in this country and will continue to apply further administrative or financial penalties in cases of non-compliance.

Update

In 2019 the Global Market in Abu Dhabi revised its anti-money laundering regulations to harmonize them with federal legislation. The new rules took into consideration the suggestions of the FATF, the intergovernmental agency for fighting money laundering and terrorism financing internationally. In recent days, the DFSA has demonstrated an increasing commitment to action against money laundering and other criminality such as fining an unlawful cash service company over $600,000 last year.

Training Regarding AML

The AML Regulation mandates financial institutions within the EU to establish and execute plans to combat criminal behavior in the nation for AML and CTF. Anti-money laundering regulations in this region are regulated by the Central Bank (CBUAE) and the DFSA is regulated in the free zone of the Dubai International Financial Center (DIFC). The CBUAE supervises all the banks, money exchangers, finance businesses, and all the financial firms working in UAE whereas the DFSA controls Authorized companies that provide financial services inside the DIFC. As part of their AML/CTF programs, both authorities demand that financial institutions maintain comprehensive customer due diligence procedures (CDDs).

Our Services Related to Money Laundering

AMA acts as an adviser on independent analysis of anti-money laundering, the fight against funding for the implementation of the framework for anti-terrorist and punitive measures in several industries. Our team of specialists can assist you in the development, implementation, and improvement of your compliance regime for not only the exchange, banking, and insurance sectors but also other non-financial enterprises and professions.

The services we provide in this field are:

  • Advisory on AML Compliance
  • Outsourcing Compliance Affairs
  • Documentation of Fiduciary Compliance Requirements
  • Providing Software for Easy Management
  • Service According to Client Needs

These services, together with the rules established by the government, must be used by companies in this country to prevent the problem of money laundering. Integrity is important to finance companies as they are long-term businesses. The credibility of these companies may be affected significantly by an AML issue. Since these firms have a huge proportion of the market, their value is also high. So, in a possible calamity, they might lose a lot.  Following government regulations and using our services related to money laundering may raise brand recognition and make the company secure for clients. The consumers do not consider a company reliable if it has been inspected or punished for a crime. The accusations of widespread corruption are quite severe, and they may create headlines. Companies would like a stable foundation, not to generate stories using negative information. Therefore, the solution to all these problems lies in these services.

Overall Economy of UAE

UAE has developed from a disadvantaged territory with small republics to a wealthy region with high standards of life since the oil discoveries more than thirty years ago. The government here boosts employment spending and expands private-sector participation in government services.

The Central Bank is responsible for overseeing the finance and banking sectors (containing banks, securities, and investing companies). Financial firms are granted a license under the Central Bank’s jurisdiction and failing to comply can result in heavy sanctions. As it sees fit, the Central Bank shall give instructions and recommendations and shall take any actions required to guarantee the integrity of the financial system of this country. Several circulars were published by the central bank detailing the client identification requirements and the fundamental suspicious transaction reporting duty.

Conclusion

Governments throughout the world have taken efforts to strengthen the AML/CFT monitoring and controls and combat financial crimes. Individuals and companies must meet the basic criteria; failing to meet the shifting demands can lead to sanctions and legal implications. The UAE Cabinet established the Anti-Money-Laundering and CFT Executive Office in December 2020 to meet international standards for this area.

Expert Team

  • Ali Chamas

  • Audit Manager
  • Adel Farag

  • Taxation Manager
  • Farah

  • Accounting and tax Associate
  • Sohaib Basharat

  • Financial Auditor & Tax Manager

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