Suspicious Activity Report (SAR) Filing Requirements Under UAE AML Laws

The United Arab Emirates (UAE) has established a strong legal and regulatory framework to combat money laundering (AML) and the financing of terrorism (CTF). A key part of this is the requirement for obligated entities to report suspicious activities.

What Are the Rules Governing Suspicious Activity Report (SAR) in UAE AML Laws?

The key legislation governing AML/CFT regulations in the UAE (UAE AML) is Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering, Combating the Financing of Terrorism and Financing of Illegal Organizations, and its implementing regulations, Cabinet Decision No. (10) of 2019.

The Central Bank of the UAE (CBUAE), Financial Intelligence Unit (FIU), Ministry of Economy (MOE), and other regulatory authorities also provide guidance and circulars clarifying SAR filing requirements, offering practical instructions and best practices.

Under Article 15 of Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering, a Suspicious Activity Report (SAR) is a formal notification submitted to the UAE Financial Intelligence Unit (FIU) when an obligated entity identifies suspicious activities linked to money laundering, terrorism financing, or other financial crimes.

Federal Decree-Law No. (20) of 2018 sets the basic principles for AML/CFT in the UAE, defining key terms like “Suspicious Transactions” governing the crime of money laundering.

SARs allow for early intervention to stop potential criminal activities before they fully occur. By requiring the reporting of suspicious behavior even before a formal business relationship or a finalized transaction, the UAE’s AML framework takes a proactive approach to preventing financial crime.

Which Entities in the UAE Are Obligated to File SARS?

SAR Filing requirements are found in Article 15, which require the following entities to file SARs.

• Financial Institutions,
• Designated Non-Financial Businesses and Professions (DNFBPs), and
• Virtual Asset Service Providers (VASPs)

Promptly inform the UAE Finance Intelligence Unit (FIU) if they suspect or have reasons to suspect money laundering or funds related to a crime. Accordingly, Financial institutions such as banks, designated non-financial businesses and professions (DNFBPs), and virtual asset service providers (VASPs) must file SARs diligently and accurately to protect the UAE’s financial system.

How Do You Identify Suspicious Activities to Be Reported Under SAR?

Identifying suspicious activity is the critical first step in triggering the SAR filing requirement. This involves recognizing unusual behaviors, events, or circumstances that suggest potential links to illicit financial activities. Several scenarios may necessitate filing a SAR.

For example,

• A potential customer deciding against opening an account after learning about Customer Due Diligence (CDD) requirements could be a red flag.
• An existing customer who cannot provide necessary information about their business operations or beneficial owners should raise suspicion.
• Inability to explain transactions, provide supporting documents, or offer satisfactory information about counterparties is also a strong indicator.

Generally, any suspicion of money laundering, fraud, or terrorism financing based on a customer’s actions, including provided or refused information, should prompt further scrutiny and potential reporting.

Guidelines of goAML Reporting

The primary platform for filing SARs in the UAE is the goAML portal, operated by the UAE Financial Intelligence Unit (FIU). Registration on the goAML portal is mandatory for Financial Institutions, Designated Non-Financial Businesses and Professions (DNFBPs), and Virtual Asset Service Providers (VASPs) in the UAE.

Registering under goAML is a 2-step process.

1. Firstly, you need to register in the protection system (SACM) of the goAML portal and get a username.
2. The second step is to get the password from the Google Authenticator app and use it to access the goAML portal.

A comprehensive SAR submission requires detailed Identity Information, Background Information, the Reason for Suspicion, a Description of the Activity, any available Transaction Details, information about the potential Source of Funds, and the identification of the Compliance Officer. The narrative section explaining the “who, what, when, where, and why” of the suspicious activity is crucial.

Obligated entities are legally required to file a SAR “without delay” as soon as they form a reasonable suspicion of illicit activity.

What Are the Penalties for Failing to Comply With SAR Filing Requirements?

Failure to report a suspicious transaction (which includes suspicious activities) without delay can result in imprisonment and/or a fine ranging from no less than AED 100,000 to no more than AED 1,000,000. Failure to register on the goAML portal can also lead to penalties.

What Are Some Post-Filing Procedures and Considerations for Obligated Entities?

Post-filing, obligated entities should reassess the risk associated with the business relationship, consider enhanced customer due diligence, review related accounts, classify the customer as high-risk, consider transaction restrictions, decide whether to continue or terminate the relationship, add the subject to internal watch lists, and be prepared for feedback from the FIU. Record retention is also crucial.