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AML/CTF compliance in UAE

WHAT ARE THE

Money laundering and terrorism financing laws in UAE?

In the United Arab Emirates (UAE), money laundering and terrorism financing are gravely treated and are regulated by the following laws:

  • Federal Decree-Law No. (20) of 2018 On Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organizations (the "AML-CFT Law" or "the Law")
  • 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 Organizations (the "AML-CFT Decision" or "the Cabinet Decision").

These laws and regulations provide a comprehensive legal framework to combat money laundering, terrorism financing, and financing of illegal organizations in the UAE.

WHAT ARE THE

Key obligations reporting entities have under UAE law?

In the United Arab Emirates (UAE), the main obligations of Designated Non-Financial Businesses and Professions (DNFBPs), specifically Dealers in Precious Metals and Stones (DPMS), under the Federal Decree-Law No. 20 of 2018 and Cabinet Decision No. 10 of 2019 include:

In the United Arab Emirates, money laundering and terrorism financing are strictly regulated by Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations, as well as by the AML-CFT Decision and further guidance by the Central Bank of UAE.

The primary obligations that reporting entities, specifically Financial Institutions and Designated Non-Financial Businesses and Professions (DNFBPs), bear under these laws in the UAE are:

  • Conducting regular independent audits and testing of their AML-CFT processes and systems to ensure effectiveness.

  • Maintaining records of all financial transactions, commercial transactions, and cash transactions with customers for a minimum of five years. This includes records and documents obtained through Customer Due Diligence (CDD) measures, ongoing monitoring, and copies of personal identification documents.

  • Organizing records and documents in a way that allows for data analysis and tracking of financial transactions.

  • Making customer information regarding CDD, ongoing monitoring, analysis results, records, files, documents, correspondence, and forms available to relevant authorities immediately upon request.

  • Implementing enhanced CDD measures proportionate to the risk level that might arise from business relationships and transactions with natural or legal persons from high-risk countries.

  • Identifying and assessing the risks of money laundering and terrorism financing when developing new products and new professional practices, including the use of new or developing techniques for both new and existing products.

WHO ARE THE

ML/TF regulators in UAE and what functions do they perform?

In the United Arab Emirates, the regulation of money laundering and terrorism financing is primarily the responsibility of the following authorities:

WHAT ARE THE

Industry sectors subject to ML/TF regulations?

In the United Arab Emirates, several industry sectors are regulated under anti-money laundering and counter-terrorism financing laws. These include:

Banking and Finance

This covers commercial banks, investment banks, finance companies, exchange houses, and money transfer businesses.

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Insurance

Both insurance and reinsurance companies are regulated under these laws.

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Securities and Commodities

This includes securities and commodities brokers and dealers.

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Real Estate

Real estate developers, brokers, and agents come under the purview of these regulations.

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Precious metals and stones dealers

Businesses dealing in precious metals and stones are subject to AML/CTF regulations.

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Legal professions

Lawyers, notaries, and other independent legal professionals when they prepare, carry out or execute a financial or real estate transaction for their client.

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Accountants

 This includes accountants, both independent and those working for accounting firms.

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WHAT ARE THE

Penalties for non-compliance with AML/CTF laws?

In the United Arab Emirates, severe penalties may be imposed for non-compliance with anti-money laundering and counter-terrorism financing laws. These penalties vary depending on the severity of the offence and can include:

  • Fines: Monetary penalties can range from AED 50,000 to AED 5,000,000. In some cases, the fines can be up to AED 50,000,000 or the equivalent amount of the money laundering operation subject of the offence, whichever is higher.

  • Imprisonment: For serious offences, imprisonment of up to 10 years can be imposed.

  • Business Suspension: In certain cases, businesses can be suspended for up to a year.

  • Asset Forfeiture: In cases involving money laundering or terrorism financing, the court may order the confiscation of funds, property, or any other assets associated with the crime.

  • Reputation Damage: Apart from legal penalties, non-compliance can also lead to significant reputational damage, which can affect the business operation.

These sanctions are detailed in the Federal Decree-Law No. (20) of 2018 On Anti-Money Laundering and Combating the Financing of Terrorism and Financing of Illegal Organisations.

WHAT ARE THE

Largest fines for non-compliance with AML/CTF laws?

Here are some of the largest fines for non-compliance with AML/CTF laws in the United Arab Emirates:

  • Abu Dhabi Government-Owned Company Case (Abu Dhabi) - The Abu Dhabi Criminal Court sentenced a former board chairman and CEO of a government-owned company to 15 years in prison for money laundering. The court also ordered the defendants to pay back about Dh8 billion to the companies. The executives were found guilty of misusing their positions, leading to the detriment of public funds and engaging in money laundering, forgery, and concealing
  • Abu Dhabi Jewellery Company Case (Abu Dhabi) - A jewellery company in Abu Dhabi has been fined Dhs50m by the Anti-Money Laundering and Tax Evasion court within the Abu Dhabi Judicial Department (ADJD) for committing money laundering and fraud against 4,000 individuals. The court also convicted four Filipino defendants on the same charges. Each defendant has been sentenced to a five-year prison term, followed by deportation, and a Dhs10m fine. This case highlights the rigid stance of UAE authorities against money laundering and fraudulent practices.

The Central Bank of the UAE

  • UAE Banks Case (Dubai, 2021) - The Central Bank of the UAE imposed fines totalling 45,758,333 dirhams ($12.46 million) on eleven banks for failing to comply with anti-money laundering and counter-terrorism financing regulations. Despite being given time to rectify shortcomings, the banks did not ensure adequate compliance, leading to these penalties.
  • UAE Bank Case (UAE, 2021) - On November 04, 2021, the Central Bank of the UAE imposed a fine of AED 19,500,000 for Breach of AML laws. The entity was accused of not adhering to anti-money laundering rules and was found to be non-compliant with the country's banking regulations.
  • UAE Exchange Houses Case (Abu Dhabi, 2021) - On October 04, 2021, the Central Bank of the UAE imposed a sanction and a fine of AED 2,885,170 on each of the six entities for violating anti-money laundering and counter-terrorism financing laws. The total collective amount of fines was AED 17.311 million.
  • Bank of Baroda Case (UAE, 2021) - On January 25, the Central Bank of the United Arab Emirates issued a penalty against the Bank of Baroda, GCC Operations, Dubai for violating Anti-Money Laundering laws. The bank was fined AED 6,833,333 due to identified deficiencies in its compliance with the 2018 Federal Decree-Law on Anti-Money Laundering. This case underscores the importance of proper adherence to anti-money laundering regulations within the banking sector.