The Intricate world of anti-money laundering regulations in the UAE

Anti-money regulations in the UAE

Among the most significant economies in the Middle East region and the entire globe, the United Arab Emirates (UAE) is an epicentre for international trade. Although the UAE is a popular destination for foreign investment, its riches make it an attractive lure for fraudsters looking to exploit its financial infrastructure. Due to shortcomings in its anti-money laundering (AML) and counter-financing of terrorism (CFT) safeguards, such as infractions of global restrictions, the Financial Action Task Force (FATF) positioned the UAE on its roster of regions under stricter surveillance in 2022. The list above is also referred to as the FATF grey list. After being listed, the UAE government pledged to comply with the demands of the FATF measures by strengthening its AML/CFT ecosystem and toughening up on non-compliant firms. 

Due to the higher degree of accountability from regulators, businesses in the UAE must be aware of the AML/CFT setting across the nation, know how to manage hazards and modify company operations to comply with regulations. Enterprises undertaking commercial relationships in the UAE must be aware of the AML/CFT framework across the country, understand how to handle risks and be prepared to adjust business processes according to the legislation because authorities hold companies to a higher standard of transparency.

The Central Bank of the UAE

The principal monetary watchdog in the nation, the Central Bank of the United Arab Emirates (CBUAE), oversees AML/CFT through its dedicated Anti-Money Laundering and Combating the Financing of Terrorism Supervision Department (AMLD). AML/CFT duties were transferred from the CBUAE's Banking Supervision Department to AMLD, established in 2020. AMLD now serves “as the link between the CBUAE and internal beneficiaries,” concentrating on legal obligations while collaborating with the justice system and the Financial Intelligence Unit (FIU) of the United Arab Emirates. There are three declared goals for the AMLD:

  • Evaluate licenced financial institutions (LFIs) in the United Arab Emirates (UAE)
  • Guarantee that they abide by the country's AML/CFT legislative and statutory regulations.
  • Uncover increasing hazards and AML/CFT challenges, as well as flaws in the nation's financial structure.

Due to the higher degree of accountability from regulators, businesses in the UAE must be aware of the AML/CFT setting across the nation, know how to manage hazards and modify company operations to comply with regulations. Enterprises undertaking commercial relationships in the UAE must be aware of the AML/CFT framework across the country, understand how to handle risks and be prepared to adjust business processes according to the legislation because authorities hold companies to a higher standard of transparency.

The UAE’s AML regulations

The UAE’s main articles of AML/CFT legislation are:

  • Federal Decree-Law No. (20) of 2018 Concerning the Prohibition of Money Laundering, Terrorism Financing, and Financing of Illegal Organisations
  • Cabinet Decision No. (10) of 2019 Regarding the Regulation of Decree Law No. (20) of 2018 on Countering the Financing of Terrorism and Illegal Organisations and Preventing Money Laundering

The statutes, in tandem, demand companies in the UAE to establish and carry out a risk-aware AML/CFT scheme, which includes know-your-customer (KYC) examinations, vulnerability testing remedies, declaring and paperwork procedures, and appropriate conformity administration. These articles are the AML/CFT Law and the AML/CFT Decision, respectively. One of the prerequisites is the designation of an AML Compliance Officer who manages the company's compliance programme.

How to comply with UAE’s anti-money regulations

The UAE mandates that businesses use a hazard-based AML/CFT solution by FATF guidelines. This implies that companies must conduct risk evaluations to determine the level of danger that every client poses and then apply appropriate adherence procedures. In light of this, UAE conformance options need to consist of:
  • Customer identification: Businesses must ascertain and confirm the truthfulness of their clients by carrying out appropriate customer due diligence (CDD) and gathering sufficient data to conduct a successful AML/CFT risk evaluation. Similarly, to stop using legal formations and fraudulent organisations to hide the identity of their customers, businesses ought to determine the ultimately beneficial ownership (UBO) of client organisations.
  • Enhanced due diligence: When a customer poses a significant risk of money laundering, businesses should conduct enhanced due diligence (EDD). This entails applying a higher degree of examination and may involve obtaining copies of official documentation or even having a third-party audit.
  • Transaction screening: Companies must continuously monitor consumer transactions for AML risk, including checking for transactions involving entities or regions that pose significant hazards.
  •  Sanctions and watchlists: UAE-based businesses must implement an efficient sanctions filtering system to find specific clients on global sanctions lists due to the increased danger of sanctions. Companies could use PEP lists as a screening tool to find politically exposed people (PEPs).

The United Arab Emirates is updating its AML/CFT legal structure, emphasising digital identity and authentication and enhancing businesses' capacity to identify financial fraud. Companies must create and implement appropriate technology solutions, especially ensuring efficient AML filtering programmes, to stay up with the nation's evolving governmental regulations.

Download the PDF below to learn more about the AML legislation in the United Arab Emirates:

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