Anti Money Laundering Policies in the UAE.

The United Arab Emirates takes combating money laundering very seriously. Hence, it has succeeded in the recent years to dismantle money laundering international network, and seized enormous amounts of illegal money. The country continues to combat money laundering with increasing precision and firmness. Thus, it has imposed a requirement that all companies and legal entities practising in the UAE must ensure having an anti money laundering policy in place, and that such policy shall be followed meticulously by every entity practising in the UAE, as well as the employees thereof.

Many companies finds it challenging to draft the right form of anti money laundering policies. Therefore, this article aims to help and assist entities in the UAE by posting a sample policy, including the rules and procedures each company/entity shall follow with no fault in order to help the authorities combating this heinous crime, and to avoid legal liability for not following the rules stipulated by the authorities. For the purposes of this article, let's call the company ABCDEF.

ABCDEF ANTI MONEY-LAUNDERING AND TERRORISM POLICY

COMPANY NAME: ABCDEF?????????????????????????????????????????????????????????????????????????????????????DATE: …/…/…

INTRODUCTION

- The combating of money laundering and the financing of terrorism has, in recent years, become a challenge of global proportions. Money launderers, terrorists and criminal groups have become more sophisticated in their methods and techniques.

- Money Laundering is:

The process by which criminals attempt to conceal the true origin and ownership of the proceeds of criminal activities. If successful, the money can lose its criminal identity and appear legitimate. Criminals do this by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract attention.

- The Financing of Terrorism is:

(a)?????An offense within the meaning of the Federal Decree-law No. (20) of 2018 on Anti-Money Laundering and combating the financing of Terrorism and Financing of Illegal Organisations, and the UN International Convention for the Suppression of the Financing of Terrorism (1999), where a person by any means, directly or indirectly, unlawfully and willingly, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out:

(b)????An act which constitutes an offence within the scope of and as defined in one of the treaties listed in the annex of the above-mentioned treaty, or

(c)?????Any other act intended to cause death or serious bodily injury to a civilian, or to any other person not taking any active part in the hostilities in a situation of armed conflict, when the purpose of such act, by its nature or context, is to intimidate a population or to compel a government or an international organisation to do or to abstain from doing an act.

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- The UAE, cognizant of the need for regulatory legislation, has enacted numerous laws at federal level to prevent and criminalize money laundering and the financing of terrorism. ABCDEF takes a zero-tolerance approach to being involved in illegal/illicit activity and will fully comply with all relevant sections of the Federal Decree-law No. (20) of 2018 on Anti-Money Laundering and combating the financing of Terrorism and Financing of Illegal Organisations.

- It is important that all staff are aware of the serious consequences for failure to comply with statutory AML duties when the Company provides an AML-regulated legal service.?It is a crime not to comply with statutory AML duties.?It is equally important for all staff to ensure that they do not unwittingly commit the offence of money laundering by not being alert to money laundering red flags.

All partners and employees of the Company are under an obligation and duty to comply with the pertinent laws and regulations, and to escalate any suspicious activity to the MLRO.

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AML LEGISLATIVE FRAMEWORK SECTION

Statutory compliance duties under the Policy include:

·????????Business Risk Assessments

·????????Policies, Controls and Procedures (PCPs)

·????????Customer Risk Assessments to determine extent of Customer Due Diligence (‘CDD’) measures

·????????CDD measures

·????????Reporting

·????????AML Record Keeping

·????????AML Training

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AML-regulated legal services

The above AML obligations only arise where a ABCDEF participates in certain types of legal work.?This work is elucidated hereunder:

“(a) the provision of assistance in the planning or execution of transactions for clients concerning any of the following:

(i) buying or selling land or property or business entities;

(ii) managing the money, securities or other assets of clients;

(iii) opening or managing bank, savings or securities accounts;

(iv)??organising??contributions??necessary??for??the??creation,?operation??or management of companies;

(v) creating, operating or managing trusts, companies or similar structures or arrangements;

(b) acting for or on behalf of clients in financial transactions or transactions relating to land;”

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Irrespective of whether an AML-regulated legal service is being provided, a lawyer and/or counsel must always remain alert to the risk of unwittingly committing the substantive offence of money laundering or terrorist financing.?

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Key responsibilities of staff therefore include (but are not limited to):

·???????????????Conducting an adequate Customer Risk Assessment and appropriate CDD on clients and transactions;

·???????????????Staying alert to potential money laundering or terrorist financing activity;

·???????????????Reporting any suspicious activity in respect of clients or transactions to ABCDEF’s management;

·???????????????Avoiding discussing any potential or actual reports of suspicion with clients or any third parties (“Tipping off”)

·???????????????Undertaking any AML-related training provided by ABCDEF;

·???????????????Keeping appropriate records of all AML related activity;

·???????????????Exercising extreme caution in relation to the acceptance of cash or the provision of ABCDEF’s client account details.?All staff must adhere to policies in relation to cash and client accounts.

·???????????????Ensuring that they do not unwittingly commit the offence of money laundering by being alert to money laundering red flags.

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BUSINESS RISK ASSESSMENT SECTION:

The partners believe ABCDEF is at a low risk of being mis-used by clients to launder the proceeds of crime.?This is based on the outcome of the Company’s Business Risk Assessment and the following factors:

·????????The work undertaken by ABCDEF is mostly ...

·????????Typical client base is ...

·????????International element to the business with request to transfer funds to client account from accounts outside the United Arab Emirates.

Accordingly, our business risk assessment is summarised as follows:

(1) Client demographic is low risk because:

·????????a stable existing client base

·????????low turnover of clients

·????????meeting clients face-to-face is the normal practice

·????????clients normally resident in the United Arab Emirates or very much connected with the GCC region.

·????????clients normally do not have complex ownership structures/trusts

The Company has controls in place to mitigate and manage potential departures from our typical low risk client demographic.

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(2) ... and ... are also low risk:

·????????non-complicated transactions.

·????????it would be unusual for payments to be made to or received from third parties.

·????????payments made by cash are rare and in very small amounts.

·????????transactions with a cross-border element are rare.

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The services we provide to our clients’ base are relatively simple, with most clients falling into similar categories.

ABCDEF has controls in place to mitigate and manage potential departures from our typical low risk legal services.

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CUSTOMER RISK ASSESSMENT SECTION:

Here, detail the Company’s approach/procedures for customer risk assessments, including:

·????????Categorization of ABCDEF’s clients, with regards to potential risks linking any of which to money laundering and/or terrorism activities, within the scope of information available to ABCDEF.

·????????Clarification that customer risk assessment and CDD is best undertaken before deciding to provide an AML-regulated legal service

·????????Who is responsible for risk assessment/how it is undertaken

·????????Detail the decision-making process, based on Customer Risk Assessment, around whether to provide an AML-regulated legal service and the extent of CDD measures to be applied

·????????When/How often reviewed

·????????High level overview of risk factors / “red flag indicators” for legal sector

·????????Control process for what happens when red flags/risks are identified before taking client on-board

·????????Detail about what happens when red flags/risks emerge during the provision of an AML-regulated legal service.

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CUSTOMER DUE DILIGENCE PROCEDURES SECTION:

ABCDEF’s procedures in relation to establishing identification and verification (ID&V), know your client (KYC), source of funds enquiries, and ongoing monitoring:

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·????????Mr. XXX and Ms. YYY are responsible for establishing ID&V/how this is undertaken.

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·????????Standard method is herein applied, and can be elucidated as follows:

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(1)?Identifying the client and verifying the client's identity.

(2)?Identifying the beneficial owners and taking measures reasonably warranted by the ML/TF risk to verify their identity.

(3)?Obtaining information reasonably warranted by the risk of ML/TF on the purpose and intended nature of the business relationship.

(4)?Conducting ongoing monitoring.

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N.B. The Company is cognisant of the Federal Decree No. 20 of 2018 on Anti-Money Laundering and Countering the Financing of Terrorism that lawyers and counsels consider the extent to which they might unwittingly commit the substantive offence of money laundering by providing a high-risk legal service which requires enhanced CDD measures.?Lawyers and counsels should document their thought process and detail their KYC (knowledge of client) when determining whether to provide a high-risk AML-regulated legal service.?The exercise of ‘documenting your thought process’ when ML/TF red flags are present can greatly assist a lawyer/counsel in the future should an AML-regulated legal service ever be examined by an Investigating Accountant or investigated by the relevant authorities.?

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CDD Controls

ABCDEF documents the following:

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·????????CDD is to be undertaken upon opening the file for every new client.

·????????Photocopies of clients’ licenses (for companies) or Emirates IDs/Passports (individuals) are kept in each client’s folder.

·????????Information regarding the validity of a client’s alleged license is always verified with the comparable information in the same on the Ministry of Economy’s online system www.ner.economy.gov.ae

·????????Simplified due diligence may occur prior to commencement of legal work if any of the client’s activity was found to be subject matter to the Company’s suspicion.

·????????In the event the results of simplified due diligence were vague and/or returned with suspicious results, then enhanced due diligence takes place, via checking the client’s financial statements and enquiring further about the activities deemed suspicious.

·????????If a serious ML/TF risk was to be found, the Company is obliged to inform the authorities on immediate basis.

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CASH & CLIENT ACCOUNT USE POLICY SECTION

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Cash & Client Account Use Procedures adopted by the Company are as follows:

·????????ABCDEF’s policy is to not accept cash for asset purchases.

·????????ABCDEF’s policy is to not accept cheques/transfers from persons other than a client or another law Company into their client account.

·????????ABCDEF’s policy is to not provide client account details for proposed transfers into client accounts from accounts outside of the United Arab Emirates, except for transfers on the background of an ongoing lawsuit, where the source of funds is known to be a commercial debt proven by documents and due by virtue of an Emirati court verdict.

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ABCDEF is mindful of the proper procedures in relation to cash and client account use which is as follows:

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1. Client accounts should only be used to hold client money for legitimate transactions for clients, or for another proper legal purpose such as an ongoing lawsuit before the Emirati courts. Money-launderers will seek to route ‘dirty’ money through a lawyer’s client account in order to ‘clean’ it, either by asking for the money to be returned or by purchasing a clean asset with the funds.?

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2. ABCDEF should monitor whether funds received from clients are from credible sources.?For example, it is reasonable for monies to be received from a company if the client is a director of that company and has the authority to use company money for the transaction.

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3. However, if funding is from a source other than the client, the Company may need to make further enquiries, especially if the client has not informed the Company what they intend to do with the funds before depositing them into the account. If the Company decides to accept funds from a third party, perhaps because time is short, the Company should ask how and why the third party is helping with the funding.

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4. ABCDEF does not have to make enquiries into every source of funding from other parties. However, the Company must always be alerted to warning signs and in some cases will need to get more information.

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5. In some circumstances, cleared funds will be essential for transactions and clients may want to provide cash to meet a completion deadline. ABCDEF should assess the risk in these cases and ask questions if necessary.

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6. ABCDEF thinks carefully before disclosing client account details.?Doing so could allow money to be deposited into the client account without their knowledge. If a ABCDEF?needs to provide client account details, it should ask the client where the funds will be coming from. Will it be an account in their name, from Ireland or abroad??ABCDEF should consider whether they are prepared to accept funds from any source about whom they have concerns.”

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“A good rule of thumb is to always be cautious of proposed legal services which will involve the routing of funds from outside of the UAE into the UAE financial system via ABCDEF’s client account.?ABCDEF must question the ML/TF risk posed by allowing their client account to be used as an entry point for money into the UAE’s financial system.”

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ABCDEF’s RED FLAG METHODOLOGY:

When red flag(s) are present, staff may find it helpful to?document their thought process, this approach allows ABCDEF to place all relevant circumstances in context and follow the ABCDEF’s recommended method for interpreting red flags/indicators of suspicion which is as follows:

“…the methods and techniques used by criminals to launder money may also be used by clients with legitimate means for legitimate purposes. Because of this, red flag indicators should always be considered in context. The mere presence of a red flag indicator is not necessarily a basis for a suspicion of ML or TF, as a client may be able to provide a legitimate explanation. These red flag indicators should assist legal professionals in applying a risk-based approach to their CDD requirements of knowing who their client and the beneficial owners are, understanding the nature and the purpose of the business relationship, and understanding the source of funds being used in a retainer.?Where there are a number of red flag indicators, it is more likely that a legal professional should have a suspicion that ML or TF is occurring.”

When red flag(s) are present, ABCDEF may decide not to take on new instructions, and may cease to act and/or a report may be statutorily required.?

This is how ABCDEF assesses and manages its money laundering and terrorist financing risk.?

REPORTING ML/TF SUSPICIONS SECTION

·????????The MLRO of ABCDEF is Mr. ...

·????????He is responsible for….

·????????Scrutiny of unusual transactions highlighted by staff.

·????????Deciding if a client can be taken on where there is a high risk of money laundering.

·????????Reviewing suspicions from employees and deciding whether a report must be made.

·????????In case of finding suspicious activity, the MLRO reports the questionable activity via goAML system.

AML TRAINING OF PARTNERS & STAFF SECTION

·????????All ABCDEF’s employees are aware of AML/TF law and regulations.

·????????Staff will be kept up-to-date or emerging risk factors/new developments for ABCDEF.

?MANAGEMENT

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The author is grateful to the Law Society of England and Wales and the Law Society of Scotland on whose template PCP this policy sample was based, adapted for the Irish legislative framework.

Photo credit: Christine Roy www.unsplash.com