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Anti-Money Laundering (AML) and Combating the Financing of Terrorism and Illegal Organisations

Overview

United Arab Emirates (UAE) contributes to global anti money laundering efforts and combating financing of terrorism (AML/CFT), and strives to fully implement the standards set by the International Financial Action Task Force (FATF).

Federal Decree-Law No. (20) of 2018 on Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organizations, and its Implementation Regulation was issued. It is the basic legislative framework that criminalizes money laundering and terrorist financing operations and capitalizes on the effectiveness of the legal and institutional framework in the implementation of procedures and measures that contribute to anti-money laundering efforts and combating the financing of terrorism and illegal organizations.

Money laundering is defined as any financial or banking transaction aimed at concealing or changing the identity of illegally obtained funds by passing them through the financial and banking system in order to make them appear as originating from legitimate sources, and then re-pumping and investing them in a legal manner contrary to their real nature.

UAE Financial Intelligence Unit (FIU)

The UAE Financial Intelligence Unit (FIU) analyses suspicious transactions and activities that may involve money laundering, terrorism financing and related criminal activities, on the basis of data and reports from financial institutions (FIs) and designated non-financial business and professions (DNFBPs) who collaborate and share knowledge to detect and act against such activities.

FIU encourages collaboration and strategic partnerships with local, regional and international stakeholders that have similar goals of combatting financial crimes. Such collaboration entails developing shared network platforms that allow for enhanced knowledge sharing between agencies to combat money laundering and terrorism financing.

Cabinet Decision No. (10) of 2019 CONCERNING THE IMPLEMENTING REGULATION OF DECREE LAW NO. (20) OF 2018 ON ANTI- MONEY LAUNDERING AND COMBATING THE FINANCING OF TERRORISM AND ILLEGAL ORGANISATIONS

As per Section 1, Article (2) on Activities and Transactions of Financial Institutions and DNFBPs, the following are considered financial activities and transactions:

1. Receiving deposits and other funds that can be paid by the public, including deposits in accordance with Islamic Sharia

2. Providing private banking services

3. Providing credit facilities of all types

4. Providing credit facilities of all types, including credit facilities in accordance with Islamic Sharia

5. Providing cash brokerage services

6. Financial transactions in securities, finance and financial leasing

7. Providing currency exchange and money transfer services

8. Issuing and managing means of payment, guarantees or obligations

9. Providing stored value services, electronic payments for retail and digital cash.

10. Providing virtual banking services

11. Trading, investing, operating or managing funds, option contracts, future contracts, exchange rate and interest rate transactions, other derivatives or negotiable financial instruments

12. Participating in issuing securities and providing financial services related to these issues

13. Managing funds and portfolios of all kinds

14. Saving funds

15. Preparing or marketing financial activities

16. Insurance transactions, in accordance with Federal Law No. (6) of 2007 concerning the Establishment of the Insurance Authority and the Organisation of its Operations

17. Any other activity or financial transaction determined by the Supervisory Authority

WHAT ARE DNFBP Trade or Business activities?

As per Article (3), anyone who is engaged in the following trade or business activities shall be considered a DNFBP:

1. Brokers and real estate agents when they conclude operations for the benefit of their Customers with respect to the purchase and sale of real estate

2. Dealers in precious metals and precious stones in carrying out any single cash transaction or several transactions that appear to be interrelated or equal to more than AED 55,000.

3. Lawyers, notaries, and other independent legal professionals and independent accountants, when preparing, conducting or executing financial transactions for their Customers in respect of the following activities:

(a) Purchase and sale of real estate.

(b) Management of funds owned by the Customer.

(d) Organising contributions for the establishment, operation or management of companies.

(e) Creating, operating or managing legal persons or Legal Arrangements.

(f) Selling and buying commercial entities.

4. Providers of corporate services and trusts upon performing or executing a transaction on the behalf of their Customers in respect of the following activities:

(a) Acting as an agent in the creation or establishment of legal persons;

(b) Working as or equipping another person to serve as director or secretary of a company, as a partner or in a similar position in a legal person.

(c) Providing a registered office, work address, residence, correspondence address or administrative address of a legal person or Legal Arrangement.

(d) Performing work or equipping another person to act as a trustee for a direct Trust or to perform a similar function in favour of another form of Legal Arrangement.

(e) Working or equipping another person to act as a nominal shareholder in favour of another person.

5. Other professions and activities which shall be determined by a decision of the Minister

How to register your company in the goAML system

Brokers and Real Estate Agents

https://www.economy.gov.ae/english/AML/Pages/real-estate.aspx

Dealers in Precious Metals and Precious Stones

https://www.economy.gov.ae/english/AML/Pages/precious-metals.aspx

Independent Accountants

https://www.economy.gov.ae/english/AML/Pages/accountants.aspx

Customer Due Diligence (CDD)

As per Section 3, Article (5) of the Cabinet Decision,

1. Financial Institutions and DNFBPs are required to undertake CDD measures to verify the identity of the Customer and the Beneficial Owner before or during the establishment of the business relationship or opening an account, or before executing a transaction for a Customer with whom there is no business relationship. And in the cases where there is a low crime risk, it is permitted to complete verification of Customer identity after establishment of the business relationship, under the following conditions:

(a) The verification will be conducted in a timely manner as of the commencement of business relationship or the implementation of the transaction.

(b) The delay is necessary in order not to obstruct the natural course of business.

2. Financial Institutions and DNFBPs are required to take measures to manage the risks in regards to the circumstances where Customers are able to benefit from the business relationship prior to completion of the verification process.

Undertaking Customer Due Diligence

As per Article (6), Financial Institutions and DNFBPs should, as the case may be, undertake CDD measures in the following cases:

1. Establishing the business relationship;

2. Carrying out occasional transactions in favour of a Customer for amounts equal to or exceeding AED 55,000, whether the transaction is carried out in a single transaction or in several transactions that appear to be linked;

3. Carrying out occasional transactions in the form of Wire Transfers for amounts equal to or exceeding AED 3,500.

4. Where there is a suspicion of the Crime.

5. Where there are doubts about the veracity or adequacy of previously obtained Customer's identification data.

Customer Due Diligence and on-going supervision of business relationships

As per Article (7), Financial Institutions and DNFBPs should undertake CDD measures and ongoing supervision of business relationships, including:

1. Audit transactions that are carried out throughout the period of the business relationship, to ensure that the transactions conducted are consistent with the information they have about Customer, their type of activity and the risks they pose, including - where necessary - the source of funds

2. Ensure that the documents, data or information obtained under CDD Measures are up-to-date and appropriate by reviewing the records, particularly those of high-risk customer categories

Establishing Customer’s Identity

As per Article (8) of the Cabinet Decision,

1. Financial Institutions and DNFBPs should identify the Customer’s identity, whether the Customer is permanent or walk-in, and whether the Customer is a natural or legal person or legal arrangement, and verify the Customer’s identity and the identity of the Beneficial Owner. This should be done using documents, data or any other identification information from a reliable and independent source as follows:

(a) For Natural Persons:

The name, as in the identification card or travel document, nationality, address, place of birth, name and address of employer, attaching a copy of the original and valid identification card or travel document, and obtain approval from the senior management, if the Customer or the Beneficial Owner is a PEP.

(b) For Legal Persons and Legal Arrangements:

(1) The name, Legal Form and Memorandum of Association

(2) Headquarter office address or the principal place of business; if the legal person or arrangement is a foreigner, it must mention the name and address of its legal representative in the State and submit the necessary documents as a proof.

(3) Articles of Association or any similar documents, approved by the relevant authority within the State.

(4) Names of relevant persons holding senior management positions in the legal person or legal arrangement.

2. Financial institutions and DNFBP’s are required to verify that any person purporting to act on behalf of the Customer is so authorised, and verify the identity of that person as prescribed in Clause (1), of this Article.

3. Financial institutions and DNFBP’s are required to understand the intended purpose and nature of the business relationship, and obtain, when necessary, information related to this purpose.

4. Financial institutions and DNFBP’s are required to understand the nature of the Customer’s business as well as the Customer’s ownership and control structure.

Identifying Beneficial Owners

As per Article (9), Financial Institutions and DNFBP’s are required to take reasonable measures to identity the Beneficial Owners of legal persons and Legal Arrangements and verify it, by using information, data, or documents acquired from a reliable source, by the following:

1. For Customers that are legal persons:

(a) Obtaining and verifying the identity of the natural person, who by himself or jointly with another person, has a controlling ownership interest in the legal person of 25% or more, and in case of failing or having doubt about the information acquired, the identity shall be verified by any other means.

(b) In the event of failing to identify the natural person exercising control as per paragraph (a) of this Clause, or the person(s) with the controlling ownership interest is not the Beneficial Owner, the identity shall be identified for the relevant natural person(s) holding the position of senior management officer, whether one or more persons.

2. For Customers that are Legal Arrangements:

Verifying the identity of the Settlor, the Trustee(s), or anyone holding a similar position, the identity of the beneficiaries or class of beneficiaries, the identity of any other natural person exercising ultimate effective control over the legal arrangement, and obtaining sufficient information regarding the Beneficial Owner to enable the verification of his/her identity at the time of payment, or at the time he/she intends to exercise his/her legally acquired rights.

Customer Due Diligence timelines

As per Article (12), Financial Institutions and DNFBPs should apply CDD measures to Customers and the ongoing business relationship on the effective date of the present Decision, within such times as deemed appropriate based on relative importance and risk priority. It should also ensure the sufficiency of data acquired, in case CDD measures were applied before the effective date of the present Decision.

Prohibiting business relationships

As per Article (13) of the Cabinet Decision,

1. Financial Institutions and DNFBPs shall be prohibited from establishing or maintaining a business relationship or executing any transaction should they be unable to undertake CDD measures towards the Customer and should consider reporting a suspicious transaction to the FIU.

2. Even if they suspect the commission of a Crime, financial institutions and DNFBPs should not apply CDD measures if they have reasonable grounds to believe that undertaking such measures would tip-off the Customer and they should report a Suspicious Transaction to the FIU along with the reasons having prevented them from undertaking such measures.

Suspicious Transaction Reports (STRs)

As per Section 5, Article (16), Financial Institutions and DNFBPs shall put in place indicators that can be used to identify the suspicion on the occurrence of the Crime in order to report STRs, and shall update these indicators on an ongoing basis, as required, in accordance with the development and diversity of the methods used for committing such crimes, whilst complying with what the Supervisory Authorities or FIU may issue instructions in this regard.

As per Article (17) of the Cabinet Decision,

1. If Financial Institutions and DNFBPs have reasonable grounds to suspect that a Transaction, attempted Transaction, or funds constitute crime proceeds in whole or in part, or are related to the Crime or intended to be used in such activity, regardless of the amount, they shall adhere to the following without invoking bank secrecy or professional or contractual secrecy:

(a) Directly report STRs to the FIU without any delay, via the electronic system of the FIU or by any other means approved by the FIU

(b) Respond to all additional information requested by the FIU.

2. Lawyers, notary publics, other legal stakeholders and independent legal auditors shall be exempt from Clause (1) of this Article, if obtaining this information regarding such Transactions relates to the assessment of their Customers’ legal position, or defending or representing them before judiciary authorities or in arbitration or mediation, or providing legal opinion with regards to legal proceedings, including providing consultation concerning the initiation or avoidance of such proceedings, whether the information was obtained before or during the legal proceedings, or after their completion, or in other circumstances where such Customers are subject to professional secrecy.

3. Financial Institutions and DNFBPs, their board members, employees and authorised representatives shall not be legally liable for any administrative, civil or criminal liability for reporting when reporting to the Unit or providing information in good faith.

Non-disclosure to Customers

As per Article (18) of the Cabinet Decision,

1. Financial Institutions and DNFBPs, their managers, officials or staff, shall not disclose, directly or indirectly, to the Customer or any other person(s) that they have reported, or are intending to report a Suspicious Transaction, nor shall they disclose the information or data contained therein, or that an investigation is being conducted in that regard.

2. When lawyers, notaries, other independent legal professionals, and legal independent auditors attempt to discourage their Customers from committing a violation, they shall not be considered to have made a disclosure.

Compliance Officer and Tasks

As per Article (21), Financial Institutions and DNFBPs shall appoint a compliance officer. The compliance officer shall have the appropriate competencies and experience and under his or her own responsibility, shall perform the following tasks:

1. Detect Transactions relating to any Crime.

2. Review, scrutinise and study records, receive data concerning Suspicious Transactions, and take decisions to either notify the FIU or maintain the Transaction with the reasons for maintaining while maintaining complete confidentiality.

3. Review the internal rules and procedures relating to combating the Crime and their consistency with the Decretal-Law and the present Decision, assess the extent to which the institution is committed to the application of these rules and procedures, propose what is needed to update and develop these rules and procedures, prepare and submit semi-annual reports on these points to senior management, and send a copy of that report to the relevant Supervisory Authority enclosed with senior management remarks and decisions.

4. Prepare, execute and document ongoing training and development programs and plans for the institution’s employees on Money Laundering and the Financing of Terrorism and Financing of Illegal Organisations, and the means to combat them.

5. Collaborate with the Supervisory Authority and FIU, provide them with all requested data, and allow their authorised employees to view the necessary records and documents that will allow them to perform their duties.

Record-keeping

As per Article (24) of the Cabinet Decision,

1. Financial Institutions and DNFBPs shall maintain all records, documents, data and statistics for all financial transactions and local or international commercial and cash transactions for a period of no less than five years from the date of completion of the transaction or termination of the business relationship with the Customer.

2. Financial institutions and DNFBPs shall keep all records and documents obtained through CDD measures, ongoing monitoring, account files and business correspondence, and copies of personal identification documents, including STRs and results of any analysis performed, For a period of no less than five years from the date of termination of the business relationship or from the closing date of the account to Customers who maintain accounts with these institutions or after the completion of a casual transaction or from the date of completion of the inspection by the Supervisory authorities, or from the date of issuance of a final judgment of the competent judicial authorities, all depending on the circumstances.

3. The records, documents and data kept shall be organised so as to permit data analysis and tracking of financial transactions.

4. Financial Institutions and DNFBPs shall make all Customer information regarding CDD towards Customers, ongoing monitoring and results of their analysis, records, files, documents, correspondence and forms available immediately to the relevant authorities upon request.