Money laundering is one of the most prevalent financial threats that affects almost every nation in the world, critically endangering the global economy. This is why countries across the globe enact various anti-money laundering laws.
With the UAE being one of the viable business markets in not only the Middle East but the entire world, it is no surprise that it grabs the attention of criminals who derive new methods of exploiting the financial system every day.
As such, being more updated and innovative in protecting the financial health of its economy is even more felt, and with its strict laws in place, the Government of the UAE leaves no stone unturned in tightening its financial security. Let us take a look into the anti-money laundering compliance in the UAE.
History of Anti-money Laundering Laws in the UAE
The undertakings to secure the financial flows in the UAE can be traced back to the dawn of the new millennium back in 2001 when the Government of the UAE initiated steps to combat terrorist financing. Foundation for addressing Anti-Money Laundering (AML) through Law No. 4/2002, the Anti-Money Laundering Law, and Counter-Terrorist Financing (CTF) through Law No. 1/2004 were enacted in place.
As per the regulation of the AML law, it became a strict norm for banks, financial companies, money exchange houses, and any other financial institutions to follow the guidelines of Know Your Customer (KYC). Furthermore, it also required financial organizations to verify the identity of their customers and maintain detailed records of their transactions.
Additionally, the regulations called for maintaining customer records for at least five years and a periodical updating process as long as the account is open.
It also further delineated the process that needs to be undertaken for identifying natural and juridical persons, the types of customer records that have to be maintained through files in financial institutions, along with the types of documents that have to be presented at the concerned institutions.
When it comes to combating terrorist financing, Law No. 1/2004 stated the penalties for the crime, including both death and life imprisonment. It also laid out the provisions for asset forfeiture and seizure. The law penalizes the illegal import, manufacture, or transport of ‘non-conventional weapons’ and their components for terrorist activity.
The Dubai Financial Services Authority (DFSA) AML Module was further revised in July 2013 to be the Anti-Money Laundering, Counter Terrorist Financing and Sanctions Module (AML Rules) to strengthen the security measures.
Recent Developments of Anti-money Laundering Laws in the UAE
The government of the UAE committed itself to fulfilling the requirements of the action plan laid out by FATF to improve the framework of AML and CFT within the country and accordingly, adopted Decree Law No. (20) of 2018 On Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations (AML/CFT&IO) and Cabinet Decision No. (10) of 2019 concerning its implementation.
Under these new, heavily secured rules, organizations are required to have a clear understanding of the AML and CFT environment and learn how to mitigate risks and how to adjust internal processes to achieve compliance in their operations.
Since this can be an overwhelming task and the nuances of the functioning of the laws are not known by the layman, it is recommended to take the assistance of trusted AML compliance services that help in enabling financial solutions that are powered by advanced analytics that, in turn, aid in strengthen your management capabilities.
How to Comply with the AML Regulations of the UAE?
In the volatile financial environment of today, companies are recommended to develop and integrate systems and processes that will help them keep up with the changing pace of the nation’s regulatory requirements.
As businesses perform various risk assessments to recognize the types of risk a specific customer brings, they will be aptly equipped to deploy adequate compliance measures. The compliance solutions in accordance with the FATF guidelines must include the following measures.
Customer Identification
All institutions have to establish and verify the identity of their customers through Customer Due Diligence (CDD) and collect relevant information for AML and CFT risk assessment. By establishing Ultimate Beneficial Ownership (UBO), companies can prevent the use of corporate structures and shell companies for concealing identities.
Enhanced Due Diligence (EDD)
Once a customer is recognized as a high AML risk, companies must conduct EDD by employing additional controls to verify additional identification documents, verifying the address details, additional information on the nature of the business relationship, obtaining information about customer’s transactions that may require further examination, updating the CDD profiles regularly, increasing the frequency of controls applied, obtaining source of funds and source of wealth, obtaining approval from senior management.
Screening of Customer Transactions
Screening of customer transactions must be done by companies on a regular basis to minimize the AML risks to the companies. The UAE regulator mandates screening against the UN consolidated list and UAE terrorist list. To access the list, click here.
Sanctions Screening Solution
Since the UAE attracts the attention of sanctions risks at a top-notch level, there has to be a need to implement efficient sanctions screening solutions that will play a pivotal role in identifying concerned customers on the international and local sanctions list.
Final Thoughts
Meeting the AML compliance challenges in the ever-evolving regulatory ambiance of the UAE is not a walk in the park. With strict laws in place, you are expected to ensure you make confident compliant decisions to deal with the present and impending financial threats to your business.
Relying on AML compliance services will keep your business protected and help you make conscious educated decisions that will comply with the laws and keep your business entity from harm’s way.