The financial and legal departments in the UAE play a pivotal role in combating money laundering (ML) and terrorism financing (TF). Accountants and other legal advisors, among other professionals, are, through UAE laws, bound by strict Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) frameworks to mitigate financial crime risks.
Also read: UAE AML/CTF Compliance
This article discusses AML/CTF obligations, control measures, and solutions, with consideration of UAE regulations and best practices.
Understanding AML CTF in the UAE
Key Legislation
The UAE has established a very strong legal framework to combat all types of financial crimes. Some of the primary laws are outlined below:
- Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of Terrorism and Illegal Organizations.
- Cabinet Decision No. (10) of 2019 on the Implementing Regulation of Decree-Law No. (20) of 2018.
- Federal Decree-Law No. (26) of 2021 on the amendment of some provisions of Federal Decree-Law No. (20) of 2018.
The laws outline the duties and responsibilities of Designated Non-Financial Businesses and Professions (DNFBPs), which include accounting and legal firms.
Regulatory Authorities
Several bodies oversee the AML CTF compliances in the UAE, including:
- Central Bank of the UAE – CBUAE
- Dubai Financial Services Authority (DFSA)
- Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM)
These regulatory bodies issue necessary guidelines and circulars to ensure businesses stay in compliance with the AML/CTF regulations.
Common AML CTF Challenges
Some of the following issues accountants and lawyers in the UAE may face to comply with the AML/CTF regulations:
- Ultimate beneficial owner identification: Identification of the actual owner of a legal entity or trust may be complicated, especially in cases of corporate structures or nominee arrangements.
- Screening for politically exposed persons (PEPs): PEPs are individuals holding prominent positions in public life, easily susceptible to corrupt practices. The identification and screening of PEPs is very time-consuming.
- Identifying suspicious transactions: It could be tricky sometimes to recognize patterns of unusual or suspicious activity in the case of complex financial transactions.
- Keeping abreast of the changes in regulations: Regulations about AML/CTF evolve. Keeping up with the latest updates on these can be a little difficult.
AML CTF Solutions for Accountants
Risk Assessment and Management
The Accountants play a very significant role in AML and CTF compliance in respect of carrying out a thorough risk assessment. This includes, but is not limited to, the following:
- Customer Due Diligence: It involves verification of the identity of customers along with an understanding of their respective businesses to make certain that they are not involved in any illegal activities.
- Enhanced due diligence (EDD): It deals with deeper scrutiny applied in cases of high-risk clients and transactions. It may include more extensive background screening and ongoing monitoring of suspicious activity.
Transaction Monitoring
Regular monitoring of the transaction will help identify suspicious activities. While tracking and analyzing financial transactions, accountants have to use sophisticated software tools to confirm that they are following the rules and regulations of anti-money laundering.
Also read: goAML Registration in UAE
Reporting Obligations
By law, they need to report every suspicious activity to the Financial Intelligence Unit (FIU). Such reports of suspicious activities include:
- Suspicious Transaction Reports – STRs
- Suspicious Activity Reports (SARs)
Training and Awareness
Accountants must pursue ongoing training to remain current with changes in AML/CTF legislation and relevant best practices. Workshops and seminars will be very helpful in bringing accountants up to speed with knowledge and skills regularly.
Also read: AML in Cryptocurrency
AML CTF Solutions for Legal Professionals
Client Due Diligence
All lawyers must conduct due diligence on their clients to prevent money laundering and terrorist financing. This includes the following:
- Know Your Customer: KYC verifies the identity of clients and ascertains their business activities.
- Ongoing Monitoring: The ongoing monitoring of the activities conducted by the client aims to find out whether there is suspicious behavior or not.
Compliance Programs
Legal firms should have stringent compliance programs. Such a program should be instituted to include:
- Internal Policies and Procedures: Putting in place specific guidelines for AML/CTF compliance.
- Regular Audits: Carrying out periodic audits regarding observing AML/CTF regulations.
Reporting and Record-Keeping
Legal Professionals must keep significant records concerning clients and transactions. They must also report suspicious activities to the competent authorities.
Training and Education
Legal practitioners must be educated regularly concerning the most recent information relating to AML/CTF legislation. Training programs will be beneficial to them to comprehend fully what will be expected of them about their duties and commitments.
Challenges
- Complex Business Structures: The business structure used by clients to hide the source of their funds may sometimes be difficult to understand.
- Irregular Transactions: Unusual transactions are not so easy to detect if one does not have appropriate monitoring tools for this purpose.
- Evolving Regulations: Staying updated with changing regulations takes lots of effort and resources continuously.
Best Practices
- Utilize Advanced Technology: Implement advanced software programs in monitoring transactions to assess risk.
- Ongoing Training: Provide ongoing training so that the staff can keep themselves updated with all AML/CTF regulations.
- Cooperation with Authorities: Cooperate completely with regulating bodies for full compliance and further advice.
How Farhat & Co Can Assist You
At Farhat & Co., we understand the complexity and challenges accountants and lawyers are facing in the UAE due to the requirement to comply with AML/CTF laws. Our AML experts would be delighted to offer far-reaching solutions related to your bespoke needs. Here’s how we can help you:
- Risk Assessments: We conduct complete risk assessments to identify potential money laundering and terrorist financing activities so that you remain one step ahead with regard to regulatory requirements.
- Transaction Monitoring: Our advanced monitoring tools observe and analyze the flow of financial transactions in order to send us early notifications when an activity is suspicious.
- Compliance Training: The dedicated continuous training will bring you and your personnel to the forefront in knowing all about the latest AML/CTF regulations and best practices.
- Due Diligence Support: Our team will support and assist you in enhanced due diligence regarding customers on high-risk clients, ensuring compliance with UAE laws.
- Regulatory Guidance: We provide ongoing support and consultations within an evolving regulatory framework that enables your business to adapt to the changing requirements.
The accountants and lawyers in the United Arab Emirates therefore play a very significant role in combating money laundering and terrorist financing. Strong AML CTF solutions, risk assessment in depth, and regulation implementation—their business and their clients can effectively be protected.