Following a number of suggestions made by the Financial Action Task Force (“FATF”), the UAE published the Federal Decree Law No. 20 of 2018 on Anti-Money Laundering and Combatting the Financing of Terrorism and Illegal Organizations (the “AML Law”) in October 2018.
The AML Law has introduced a number of concepts which are aimed at developing the effectiveness of the UAE government in detecting and putting a stop to financial crimes and terror financing.
This article will discuss the most salient aspects of the AML Law as well as any penalties flowing from its contravention.
Anti-Money Laundering (AML) Law
- Article 1 of the AML Law includes the definition of a “predicate offense” as any act which is considered to be a felony or misdemeanor under the laws of the UAE, irrespective of whether such act is committed within or outside the borders of the UAE.
- Article 1 of the AML Law goes further to confirm the definition of a Designated Non-Financial Businesses and Professions (“DNFBPs”). The concept of a DNFBP relates to any business or profession which cannot be considered to be a Financial Institution yet still poses a money laundering or terror financing risk. Similar to Financial Institutions, DNFBPs are now also necessitated to identify and assess the risks related to their business activities and to implement adequate preventative measures and controls to mitigate such risks.
- Article 1 of the AML Law provides an extensive definition of “Funds” specifically including “electronic or digital” assets and thereby addressing money laundering via the internet and terror financing by means of cryptocurrency.
- Article 1 of the AML law also introduces the ideas of “Controlled Delivery,” which is a situation where the authorities permit the financial crime to run its course, and “Undercover Operation,” which is where undercover police officials participate in money laundering or other financial crimes, in both cases with the true purpose of arresting the entire criminal enterprise and not just a single perpetrator.
- Article 2(1)(c) of the AML Law includes the actions of simply “gaining” or “possessing” illegal proceeds in its definition of a “perpetrator” of the crime of money laundering.
- Furthermore, as stated in Article 2(2) of the AML Law, money laundering crimes are considered to lie independently to the predicate offense. Therefore, the perpetrator may be prosecuted and convicted for both the predicate offense as well as the money laundering offense. Moreover, Article 2.3 provides that it is not a prerequisite to prove the illicit source of funds in order to secure a conviction for the predicate offense.
- As per Article 9 of the AML Law, provision is made for the establishment of an independent Financial Information Unit (“FIU”). The role of the FIU is to receive and process information related to financial crime. The FIU is further authorized to process and investigate suspicious transaction reports by obtaining further information from the concerned parties. In addition to the aforesaid, as provided for in Article 9(2), the FIU is empowered to cooperate and exchange information with its counterparts in foreign jurisdictions.
- As prescribed by Article 14 of the AML Law, the authorities are empowered to impose ongoing reporting obligations on financial institutions and DNFBPs. Furthermore, amongst others, provision is made for the ability to levy administrative penalties not exceeding five million dirhams, the arrest of responsible individuals, the restricting of activities or operations, and cancellation of licenses etc.
- In scenarios where a Financial Institution or DNFBP has reasonable grounds to suspect that a transaction or attempted transaction is related to a crime, Article 15 of the AML Law requires such financial institutions and DNFBPs to submit a suspicious transaction report to the FIU directly and without delay.
- Moreover Article 15, lawyers, notaries public, other legal professionals and independent legal auditors are exempted from this obligation where the information was obtained during the assessment of their clients’ legal position, whilst representing their clients before the courts, other judicial authorities or in arbitration or mediation proceedings, when providing a legal opinion related to legal proceedings, or other scenarios where the client’s interests would be protected by professional privilege.
- The reason for the inclusion of this exemption in Article 15 is to provide relief to these professionals, who are generally bound by confidentiality requirements and non-disclosure arrangements.
- Article 16 of the AML Law takes it one step further by criminalizing acts which are in contravention of Chapter 7 of the United Nations Convention for the Prohibition and Suppression of the Financing of Terrorism and Proliferation of weapons of mass destruction.
- Articles 18 and 19 of the AML Law call for the top prioritization of requests for international cooperation related to money laundering and terror financing. UAE authorities are specifically obliged to provide assistance with the collection of documentation, interrogation of witnesses and suspects, and the extradition of suspects.
- Article 19(2) specifically provides that requests for international cooperation shall not be declined if the crime involves tax or financial affairs, is related to politics, is under investigation and/or prosecution locally or internationally (unless it impedes the local investigation and/or prosecution), or because of confidentiality constraints on the concerned financial institution or DNFBPs, unless such restrictions are imposed in terms of UAE legislation.
- Lastly and rather importantly, the AML Law includes that there is no statute of limitation on the prosecution of perpetrators of crimes of money laundering and terror financing.
Anti-Money Laundering Penalties
Some of the most notable punishments laid down for contravention of the provisions of the AML Law are as follows:
In accordance with Article 22 of the AML Law, any person who commits or attempts to commit the crime of Money Laundering as defined in Article 2(1) of the AML Law shall be sentenced to imprisonment for a period of not more than 10 years and/or shall be subject to a fine of between one hundred thousand and five million dirhams.
Furthermore, any person found guilty using the proceeds of terror financing shall be sentenced to life imprisonment or temporary imprisonment not exceeding a period of ten years and a fine of between three hundred thousand dirhams and ten million dirhams.
Article 23 of the AML Law provides that in instances where manager or representatives of companies found guilty of AML offences may face hefty fines of between five hundred thousand and fifty million dirhams, and in instances where the crime is related to terrorist financing, the court will make an order for the dissolution of the company and the closure of the offices where the criminal activity took place.
Article 24 provides that the failure to report a suspicious transaction to the FIU, whether willfully or by gross negligence, may lead to imprisonment and/or a fine of between one hundred thousand dirhams and one million dirhams.
Article 25 provides that any person who warns a person or reveals any suspicious transaction under review or investigation shall be liable for imprisonment for a period of at least six months and/or a penalty of between one hundred thousand and five hundred thousand dirhams.
To discuss with our Anti-Money Laundering team on how we can help ensure of your business to relevant AML regulations, call us today!