The United Arab Emirates (UAE) has established a sound framework in the fight against money laundering and financing terrorism (AML/CTF), firmly based on international standards to maintain the integrity of the financial system.
The article below provides an overview of the UAE’s AML/CTF compliance requirements, emphasizing main regulations, compliance obligations, and the penalties for non-compliance.
AML/CTF Key Regulations and Legal Framework
The most significant AML/CTF regime applicable in the United Arab Emirates is Federal Decree-Law No. 20 of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organisations and its implementing regulation, Cabinet Decision No. 10 of 2019. All these are aimed at deterring money laundering, terrorism financing, and other related crimes.
Federal Decree-Law No. (20) of 2018
This law provides the legal basis in the UAE for AML/CTF programs. It provides for a National Committee for AML/CTF, headed by the Governor, Central Bank of the United Arab Emirates (CBUAE), and an independent Financial Intelligence Unit (FIU) for receiving the suspicious transaction reports (STRs) of financial institutions and other entities.
Cabinet Decision No. (10) of 2019
The Decision provides in detail the provisions for the implementation of the Provisions of Federal Decree-Law No. (20) of 2018. The Decision outlines the respective obligations and responsibilities of financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs) for establishing an AML/CFT Program, conducting Customer Due Diligence, and reporting suspicious activity.
Compliance Obligations for Financial Institutions
The UAE financial institutions (FIs) are obligated to implement an AML/CTF Programme to include the following elements:
Customer Due Diligence (CDD)
FIs should perform CDD measures that will verify the identity of the customers and that of the beneficial owners. This also involves obtaining information on the purpose and intended nature of the business relationship and carrying out ongoing monitoring to ensure the transactions being performed are coherent with the profile of the customer.
Suspicious Transaction Reporting (STR)
A financial institution should, without delay, send an information report to the Financial Intelligence Unit in cases where it suspects or has reasonable grounds to suspect that the business relationship of a customer is related to a crime; or, the customer’s funds involved in the business are proceeds of a crime or have been used to commit a crime.
Record Keeping
FIs have to maintain a record of all transactions and information pertaining to CDD at least for a period of five years. The records should always be made available for inspection whenever called upon by the regulatory authorities.
Risk Assessment
FIs should constantly undertake risk assessments to identify and mitigate their exposures to the various possible AML/CTF risks. It includes the development of risk rankings regarding each customer, product, service, and geographic location.
goAML System
GoAML is a significant tool in AML/CTF compliance in the UAE. The goAML portal, operated by the UAE FIU, is the world’s most recognized anti-money laundering reporting portal which helps in reporting suspicious transactions substantially.
All financial institutions and relevant DNFBPs are liable to register themselves with the goAML system for their STRs, and all other reports. This system therefore improves the efficiency and effectiveness of FIU in analyzing suspicious activities and acting upon it4.
Role of the Central Bank of the UAE (CBUAE)
The CBUAE plays a very important role in overseeing and enforcing AML/CTF compliance. Consequently, in 2020, the Anti-Money Laundering and Combating the Financing of Terrorism Supervision Department (AMLD) was set up to oversee these efforts. The AMLD undertakes the following responsibilities, including:
- Examining licensed financial institutions (LFIs) for compliance with laws relevant to AML/CFT.
- Coordinating with the National AML/CTF Committee and other domestic stakeholders.
- International cooperation through sharing information and best practices.
Penalties for Non-Compliance with AML Regulations in the UAE
Below are brief details of the fines under Decree-Law No. 20 of 2018 and Cabinet Decision No. 16 of 2021 for non-compliance by Designated Non-Financial Businesses and Professions:
| Violation Category | Description | Fine Amount |
| High-Penalty Violations | Dealing with fake banks, maintaining accounts under fake names, dealing with sanctioned clients. | AED 1 Million |
| Major Violations | – Failure to conduct Enhanced Due Diligence (EDD) on high-risk clients. – Not notifying the Financial Intelligence Unit (FIU) of suspicious transactions. – Tipping off customers or non-cooperation with authorities. | AED 200,000 |
| Risk-Assessment Violations | – Failure to conduct a risk assessment or identify risks in products and services. – Failure to identify and verify Ultimate Beneficial Owners (UBOs), especially for Politically Exposed Persons (PEPs). | AED 100,000 |
| Operational Violations | – Failure to: – Establish internal AML/CTF policies. – Appoint a compliance officer. – Train employees. – Monitor transactions effectively. – Maintain records for 5 years. | AED 50,000 |
| Repeated Violations | Authorities have the right to double fines for repeated offenses. | — |
The Role of Designated Non-Financial Businesses and Professions (DNFBPs)
The DNFBPs are real estate agents, dealers in precious metals and stones, and legal professionals. Significant AML/CTF obligations also exist for them. Similar CDD, STR, and record-keeping measures need to be adopted by them also, as are done by financial institutions.
International Cooperation and FATF Compliance
The UAE is committed to the implementation of the Financial Action Task Force (FATF) recommendations. It actively participates in mutual evaluations, and significant enhancement has been achieved in improving the UAE’s AML/CTF framework to meet international standards.
Mutual Evaluations and Progress
The UAE has been subjected to several mutual evaluations by the FATF, where the effectiveness of its AML/CTF measures is tested. These mutual evaluations identified progress made by the UAE toward strengthening its regulatory framework and moving closer to aligning with international standards. The UAE works with the FATF and other international bodies to address any identified gaps and further reinforce its AML/CTF regime.
Also read: Anti Money Laundering Specialist in UAE
International Cooperation
The UAE is among those countries that actively cooperate with their international partners in combating money laundering and terrorism financing. It includes the exchange of information and best practices, conducting joint investigations, and providing technical assistance to other countries. The commitment of the UAE to international cooperation is one of the main parts of its AML/CTF strategy.
The Importance of Training and Awareness
Effective AML/CTF compliance involves employees from financial institutions and DNFBPs having training and awareness programs on an ongoing basis. In particular, such programs should reflect the latest regulatory developments, typologies of money laundering and terrorism financing, and best practices related to the detection and reporting of suspicious activities.
Training Programs
The financial institutions and DNFBPs have to provide AML/CTF compliance training for employees periodically. It includes training on identification of suspicious transactions, carrying out customer due diligence, and reporting of suspicious activities to the FIU. The nature of the training programs must be specific to the particular risk and requirement relevant to each institution.
Awareness Campaigns
Along with the training programs, awareness campaigns have an important role in developing a culture of compliance within financial institutions and DNFBPs. Such awareness campaigns include conducting workshops, seminars, and informative materials explaining and highlighting the importance of AML/CTF compliance, which may emanate from failing to act accordingly.
Conclusion
The comprehensive AML/CTF framework of the UAE reflects the country’s commitment to a safer, more transparent financial system. The UAE plans to prevent ML/TF risks, and thus, it has made strict regulations against these threats and has collaborated internationally too. FIs and DNFBPs have to institute sound AML/CTF programs within this initiative and adhere to all the requirements of the law accordingly.
How Farhat & Co. Can Help You
Handling AML and CTF compliance can be difficult. Farahat & Co. offers complete support, including:
- Conducting AML/CTF audits to assess compliance levels.
- Assist in completing the registration process on goAML and conduct risk assessments.
- Providing training programs regarding AML policy and procedure to staff.
- Assist in providing a compliance framework to companies concerning UAE laws and regulations.
Contact Farahat & Co. today to ensure your business is compliant with UAE’s AML and CTF requirements.
