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:
- Central Bank of the UAE: The Central Bank is the main regulator for banks and other financial institutions. It issues directives and guidelines on AML and CTF measures and monitors compliance.
- Financial Intelligence Unit (FIU): The FIU is responsible for receiving, analyzing, and disseminating suspicious transaction reports (STRs) related to money laundering and terrorism financing.
- The UAE Securities and Commodities Authority (SCA): The SCA is responsible for regulating the country's securities and commodities sector, including monitoring for signs of money laundering and terrorist financing.
- The Insurance Authority: This authority oversees the insurance sector's adherence to AML and CTF regulations.
- The Dubai Financial Services Authority (DFSA): The DFSA is the independent regulator of financial services conducted in or from the Dubai International Financial Centre (DIFC), a special economic zone in Dubai. It has its own set of AML and CTF regulations that firms in the DIFC must comply with.
- The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM): Similar to the DFSA, the FSRA oversees compliance with AML and CTF regulations by firms in the ADGM, another special economic zone in Abu Dhabi.
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:
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.