Anti-Money Laundering in UAE

Introduction

The UAE is one of the foremost centers for money laundering activities. However, this fact has been taken into consideration and the Anti-Money Laundering Law was enacted by the Central Bank of UAE in February 2012 to counter these illicit practices. This law aims to protect the integrity of the financial system and create a transparent environment where all parties are protected from potential financial crimes including money laundering, terrorist financing, and fraud.

Anti-Money Laundering Law

The UAE Anti-Money Laundering and Terrorist Financing Law (AML Law) is a Federal Law that aims to prevent the use of the financial system for money laundering or terrorist financing. The AML Law sets out rules to regulate the activities of relevant institutions, professionals, and associations; sets forth procedures for tracing funds related to terrorist acts or money laundering offenses; establish a framework for confiscation of funds relating to terrorism or money laundering offenses; provides for customer due diligence standards and reporting obligations on suspicious transactions in addition to other requirements.

The AML law has been supplemented by several directives issued by UAE Central Bank which guide how it should be implemented by financial institutions and other relevant entities as well as detailing requirements relating specifically to customer due diligence (CDD).

The role of the Central Bank

The Central Bank of the UAE is the national bank of the country, responsible for regulating and overseeing financial activities. The main functions of the Central Bank are to:

• establish macroeconomic policies to maintain stable economic growth;
• develop and implement monetary and exchange rate policies;

Key definitions

Money laundering is the process of disguising the proceeds of criminal activity to make them appear legal. This is done by placing funds in a series of transactions and taking advantage of the legitimate businesses that exist in the UAE market. The objective is to make it difficult for law enforcement agencies to identify and trace the proceeds from crime, or even prove where those funds came from.

Money laundering is a criminal offense under UAE laws, whether it takes place domestically or overseas. There are severe penalties imposed on those convicted of money laundering offenses in the United Arab Emirates (UAE). According to Article 10 of Federal Law, No 9 for 2004 on combatting terrorism financing and money laundering, anyone who engages in money laundering shall be punished by imprisonment not exceeding 10 years or a fine not exceeding AED 50 million ($13 million) or both.

Responsible Person

You may be wondering, “What is a responsible person?”

A responsible person is someone who has control over a business or organization and can be held personally responsible for money laundering.

Responsible persons must have specific knowledge of their duties and responsibilities as well as the dangers associated with money laundering. In addition to this, they must have the ability to identify suspicious activity which could lead to money laundering. They must also ensure that adequate risk management procedures are in place that will prevent money laundering from taking place within their organization or business. If you are a legal entity (i.e., LLC), then you will be deemed a responsible person if:

• Your articles of association state that one individual holds full powers; or
• Your articles of association state that one individual exercises all rights given by law; or
• You elect an individual as the sole director

Anti-Money Laundering and Terrorist Financing Offences

Anti-money laundering and terrorist financing offenses are criminal offenses committed in the UAE. The UAE law defines money laundering as the process by which criminals use financial systems to hide the origins of the proceeds of crime, while also disguising their identities. The UAE’s Anti-Money Laundering and Terrorist Financing Law No. 5 (2009), as amended by Federal Decree No. 8/2013, prohibits activities that pose a threat to the integrity or stability of its financial system including:

• Accepting funds obtained through illegal activities;
• Handling accounts with suspicious transactions;
• Remitting funds acquired from illegal activities abroad; and
• Using banking channels for illegal purposes.

Reporting Offences and Suspicious Transactions

A reporting officer is any person who knows or has reasonable grounds to suspect that a transaction or activity is related to money laundering. These people must report their suspicions to the FIU.

In the UAE, only a financial institution may be designated as a reporting entity. A financial institution can be any of the following:

• A bank (including foreign banks) operating by UAE law.
• An investment company licensed by the DFSA and subject to its disclosure rules and regulations; this includes traded funds, alternative investments, and advisory companies offering these services as well as more traditional funds such as hedge funds, private equity funds, and venture capital partnerships.
• A finance company authorized by the DFSA under Federal Law No 8 of 1980 (as amended) on Consumer Credit Organizations; this includes microfinance institutions.* Any other entity required under federal law or regulation to report suspicious transactions.

Internal Procedures and Controls

Internal procedures and controls are a part of any effective AML program. The following are some of the key areas where you can implement internal procedures and controls:

• Securely storing customer information, such as name, address, date of birth, and identification number or passport number.
• Having written policies about employee conduct (e.g., compliance with laws).
• Providing training on AML issues to all employees who handle customer accounts or transactions involving money. This should include an understanding of how money laundering works; what is considered suspicious activity; how to report suspicious activity; who should be contacted when reporting suspicious activities; what happens after reporting suspicious activities/transactions; etcetera).

These internal procedures will help ensure that there is no abuse or misuse of power within your organization

Penalties for Non-compliance

Penalties for Non-compliance

• Criminal penalties for money laundering in the UAE can be severe. Penalties include prison sentences of up to 15 years, fines, and confiscation of property.
• Administrative penalties are in the form of fines and/or license suspension or cancellation. This can also result in a ban on certain professions such as banking or legal practice (as with licensed accountants), as well as travel bans that prevent defendants from leaving the country while they are appealing their convictions.
• Civil remedies include damages claims by victims seeking compensation for losses suffered as a result of money laundering activities carried out by others; these may include losses due to frauds perpetrated against them by criminals who used laundered funds obtained through illegal activities like drug trafficking or kidnapping ransom payments

Exemptions from the application of the Law

The following are some of the exemptions from the application of the Law:

• Gifts and inheritances;
• Loans;
• Transactions between family members; and
• Transactions between spouses.

Anti-Money Laundering Law helps in combating money laundering activities in the UAE.

Money laundering is a serious crime that threatens the stability of the UAE economy, financial system, and reputation as a safe and secure place to do business.

Money laundering is a criminal activity that involves disguising the origins of money obtained through illegal activities. It can be done in many ways such as:

• Importing or exporting currency in large amounts without any legitimate reason;
• Using fake bank accounts to hide the money;
• Claiming tax credits or other legitimate expenses while paying cash (e.g., paying cash for real estate); and/or
• Having front companies pay vendors, friends, or family members who then deposit them into another person's account without disclosing the true source of funds.

Conclusion

The Anti-Money Laundering Law is an important tool for the UAE to combat money laundering activities. It helps in identifying the sources of funds and other assets which are used in illicit activities. This law also ensures that banks, financial institutions, and other related entities can comply with their obligations under international standards.