INTRODUCTION
The United Arab Emirates (UAE) is a global financial hub, attracting investors and businesses worldwide. However, with the increased flow of money comes the risk of money laundering and terrorism financing. To mitigate these risks, the UAE has enacted several laws and regulations to combat money laundering and terrorist financing, known as the Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) laws.
UAE’S AML REGIME
The UAE’s AML/CFT regime is based on international standards, including the Financial Action Task Force (FATF) recommendations. The UAE became a member of the FATF in 2004 and has implemented all of the FATF’s recommendations to combat money laundering and terrorist financing.
Financial institutions and Designated Non-Financial Business Professions (DNFBPs) must conduct due diligence on their customers, including verifying their identity and assessing their risk. They must also monitor their customers’ transactions and report any suspicious activity to the UAE’s Financial Intelligence Unit (FIU), known as the Anti-Money Laundering and Suspicious Cases Unit (AMLSCU).
The AMLSCU is responsible for receiving, analyzing, and disseminating information related to money laundering and terrorist financing. It also cooperates with other FIUs worldwide to combat money laundering and terrorist financing.
The Cabinet Decision no. 58 of 2020, has created a mechanism to recognize an entity’s Ultimate Beneficiary Owners (UBOs). The cabinet decision requires the entities to maintain adequate and up-to-date information about their shareholders and the ultimate beneficiary owners. The organizations must file a register of UBOs, shareholders, nominee board members, and other supporting documents to the relevant licensing authority.
The UAE’s AML/CFT laws also impose penalties for non-compliance. Financial institutions and DNFBPs that fail to comply with the AML/CFT laws may be subject to fines, revocation of their license, or even criminal prosecution.
In addition to its domestic AML/CFT regime, the UAE has signed several international agreements to combat money laundering and terrorist financing. For example, the UAE has signed the UN Convention against Transnational Organized Crime and the UN Convention against Corruption.
ADGM’s AML REGIME
Abu Dhabi Global Market (ADGM) has created its own AML Rulebook governing business in the free zone. The handbook operates in addition to the existing federal laws and regulations. The governing body of businesses operating in the ADGM are responsible for complying with the Rulebook.
The Rulebook contains detailed guidance for businesses on developing and implementing Risk Based Approach measures for conducting its business. Rulebook also provides for measures to conduct customer due diligence, complying with money laundering reporting requirements, conducting training and awareness.
An important aspect of the Rulebook among other things is the implementation of Risk Based Approach (RBA) in a business. The general principle is that where there are higher risks of money laundering, a Relevant Person is required to take enhanced measures to manage and mitigate those risks. Relevant Person is expected to have in place processes to identify, assess, monitor, manage and mitigate money laundering risks.
CONCLUSION
The UAE’s and ADGM’s AML/CFT regime is based on international standards and aims to combat money laundering and terrorist financing. Financial institutions and DNFBPs must implement measures to prevent money laundering and terrorist financing, including conducting CDD on their customers, reporting suspicious transactions, and implementing internal controls and policies to detect and prevent money laundering and terrorist financing.
For more information, you may contact:
Thomas Paoletti
Francesca Romana Valeri
Fauzia Khan
