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29 September 2021, 13:36

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Zero-Tolerance for Money Laundering

Introduction to AML in the UAE

In the past years, the UAE has made significant improvements to its Anti Money Laundering and Countering the Financing of Terrorism system. They have demonstrated a high-level commitment to better understand and mitigate the risk of these crimes.

In this blog, you can read about the latest measures taken in the United Arab Emirates to combat money laundering and terrorist financing.

FATF Status

The United Arab Emirates is not currently on the FATF List of Countries that have been identified as having strategic AML deficiencies. However, the UAE has had to develop strict regulations to stay off that list.




Regulations 

In June 2021, the Central Bank issued new Guideance on anti-money laundering and combatting the financing of terrorism (AML/CFT) for its licensed financial institutions (LFIs) on suspicious transaction reporting and legal persons/arrangements.  

The Guidance covers the:  

  • The understanding and mitigation of risks as well as the effective performance by the LFIs of their AML/CFT statutory obligations  
  • The standards and guidance issued by the Financial Action Task Force (FATF) 

In September 2021 the final draft of the AML and CFT Report was introduced in by the CBUAE. This is the latest measure to mitigate the risk of these crimes. Under this report, banks are now required to develop internal procedures to identify suspicious transactions and to report to the central bank’s FIU. This guidance aims to promote rigorous regulations to combat money laundering. 

Creating these policies are a step in the right direction, however, there needs to be planned execution to ensure these regulations are being followed.  




Execution 

The CBUAE’s latest AML regulations outline that LFIs will have to tighten the grips on transaction monitoring and sanctions screening. On top of this, LFIs are mandated to develop internal policies, controls and procedures to manage the risk of money laundering. These indicators should aim to identify suspicious transactions and activities as well as filing a SAR report. LFIs are also required to regularly screen their databases and transactions against names on the UN Security Council. This should occur before any transaction with any client, individual or corporate.




Court for AML & CFT

To ensure these regulations are being followed, the UAE created a dedicated office and court. In November 2020, the Abu Dhabi Judicial Department established this court to tackle money laundering. It acts as an active step towards anti money laundering regulation, and to strengthen the integrity of the financial system. It aims to be solely dedicated to investigating money laundering and tax evasion crimes. This step ensures strict regulation as well as strengthens the UAE’s place on the global stage. It also aims to overcome the perception that the UAE is a hot spot for illicit money crimes. As seen in this news report, the court follows the policies rigidly as in this case it sentenced 23 defendants to 10 years in prison, plus a fine of Dh10 million each. 




Executive Office for AML & CFT

The new dedicated office to confront money laundering was established in February in 2021 in the Capital of the UAE. The Executive Office for Anti Money Laundering and Counter Terrorism Financing will report directly to the Higher Committee overseeing the UAE’s National AML/CFT Strategy, chaired by Sheikh Abdullah bin Zayed Al Nahyan, Minister of Foreign Affairs and International Cooperation.  

The Executive Office was built to oversee the implementation of the UAE’s National AML/CFT Strategy and National Action Plan. The programme of reforms is designed to strengthen the UAE’s anti-financial crime regime.  




Collaboration 

The UAE have gone one step further in the fight against money laundering: international collaboration. Money laundering and finance terrorism is a global threat that does not stop at country boarders. The UAE have adapted a comprehensive approach to the latest AML policies. 

  • The UK & the UAE: The latest development was seen through the introduction of the UAE-UK Sovereign Investment Partnership in Sept 2021, a $13.8 billion investment deal between the two nations. The UK’s investment in the UAE aims to identify shared interests like fintech, outlining the opportunity for collaboration. Both countries pledged assistance to one another in a joint approach to help stem the flow of illicit funds.  

 

  • The USA & the UAE: In June 2021 the UAE played a strategic role in a money laundering case alongside the USA. This article outlines the cooperation by both nations in the fight against money laundering. On top of this, US and UAE representatives met on an official visit to discuss this and strengthen their relationship.  

 

  • China & the UAE: In August 2021 the UAE signed a Memorandum of Understanding with the China Anti-Money Laundering Monitoring and Analysis Centre to support international collaboration of fighting money laundering. The aim is to continue the joint efforts of both nations to confront suspicious activity both nationally and internationally. 



Transaction Monitoring

The aim of transaction monitoring is to be the first step in reduce the risk of money laundering and other forms of financial crime. The guidance published by the CBUAE emphasises the importance of transaction monitoring and doing it correctly. It is the rigorous continuous checking for suspicious activity. Effective transactions monitoring should not look at a single transaction in isolation but should utilise as much data as possible to paint the fullest picture possible. It depends critically on information obtained through application of customer due diligence illustrate the element of risk. 

Software programmes, such as the one created by DX Compliance, uses the most effective technology to irradiate human error within AML. An effective transaction monitoring program enables LFIs to detect, investigate and report suspicious transactions. Read more about the CBUAE guidelines here, and more about how DX Compliance can improve your transaction monitoring here. 


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