Anti Money Laundering and Terrorism Financing.

The United Arab Emirates (UAE) has implemented the UN Security Council Resolution (UNSCR) on Targeted Financial Sanctions by Cabinet Resolution No. 74 of 2020, as part of its legislative framework against money laundering and terrorism financing activities in the country.[1]

Under the UAE Cabinet Resolution No. 74 of 2020 regarding terrorism lists, all persons (natural or legal), Financial Institutions, and Designated Non-Financial Business Professionals (DNFBPs)[2] have various obligations to perform[3]. These obligations are

• Registration
• Screening
• Implementing Targeted Financial Sanctions
• Notification to the supervisory Authority
• Setting and implementing of internal control or procedure
• Cooperation with Supervisory Authority

In this write-up, we shall discuss the above-listed obligations on all persons within the UAE to implement the Targeted Financial Sanctions regime.

Duty to Register to implement Targeted Financial Sanction to Combat Money Laundering and Terrorism Financing in the UAE

All persons in the UAE are required to register on the Executive Office’s website to receive automated notifications regarding new listing, re-listing, updating, or de-listing decisions issued by the UN Security Council, the Sanctions Committee, or the Local Terrorist List of the UAE.

Screening as a means to implement Targeted Financial Sanction to combat Money Laundering and Terrorism Financing

All-natural persons and entities in the UAE are required to screen their databases and transactions regularly. They are required to conduct checks every day on the databases to identify possible matches against names on sanction lists issued by  United Nations Security Council, the Sanctions Committee, or the UAE Local Terrorist Lists. They are required to screen   the following:

• Their existing customers’ databases.
• The names of parties to any business or transaction;
• Database of the names of potential customers;
• The names of beneficial owners;
• The names of persons and entities they have either a direct or indirect relationship.
• Any customer before conducting any transaction or entering a business relationship with such customer
• The directors and agents acting on behalf of customers (including individuals acting under power of attorney)

All persons in the UAE must carry out these screening measures to implement Targeted Financial Sanctions before onboarding a customer and facilitating a transaction. Screening is required to be done daily at the entity’s initiatives. They are always expected to update themselves on the Sanction list as the list is continuously updated and available on the Executive Office website and the United Nations website.

Implementing Targeted Financial Sanctions to combat Money Laundering and Terrorism Financing

All persons within the UAE are required to implement freezing measures, without delay, and prior notice to the listed Person, immediately a match is found through the screening process with the United Nations (UN) List or the UEA Terrorist List[4] . Entities and natural persons are required to, without prior notice, freeze all funds of the listed persons or entities immediately or, as the case may be, within 24 hours.

According to Relevant United Nations Security Council Resolutions (UNSCRs) or decisions of the UAE Cabinet regarding the issuance of Local Lists, they are also required to implement decisions to lift freezing measures without delay.[5]

Under the law, any person who freezes funds, or refuses to provide financial services relating to a listed person, group, or entity, or declines to perform any other obligation in line with the provision of law on Targeted Financial Sanctions shall not be liable to damages or claims in any civil, penal or administrative proceedings resulting from such actions if done in good faith.

Duty on all persons to notify the Supervisory Authority under the UAE AML/CFT Law

Under the UAE AML/ CTF Law, all persons in the UAE must immediately notify the Supervisory Authority in the following cases:

• When they identify funds, attempted actions, and actions that fall under of requirements of relevant UNSCRs or Cabinet Decisions regarding Local Lists.
• Where they detect any match with listed persons or entities, they must give details of the match data and actions they have taken as per the requirements of Relevant UNSCRs and Local Lists to the Supervisory Authority.
• If they discover that one of their  previous or an occasional customer is listed on the Sanctions List or Local List
• If there is a suspicion that a current or former customer or any person they have a business transaction with is listed or has a direct or indirect relationship with the Listed Person.
• They have not taken any action due to a false positive and the inability to dismiss such false positives through available or accessible information.
• Information on the status, nature, value of unfrozen funds, including the measures taken concerning the unfrozen funds, and any other information relevant to such decisions.

Financial institutions and DNFBPs must within two (2) business days report any freezing measure taken and attempted transactions to the relevant Supervisory Authority and Executive Office.

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Obligation to set and implement internal control or procedure by entities in the UAE to Targeted Financial Sanctions

Entities are required to set and implement internal control and procedure to ensure compliance with the obligations arising from Resolution No. 74 of 2020. They are further required to have in place policies and procedures that will prohibit staff from informing the customer or any third -party either directly or indirectly that freezing action or any other measures are going to be implemented in line with the provision of the law[6]. Entities in the UAE will be able to define all relevant compliance processes if they set internal controls, policies, and procedures, and practices to effectively implement these measures to the risks they may likely be exposed to in the course of their business.

Obligation to Cooperate with Supervisory Authority

All persons in the UAE must cooperate with the Executive Office and the relevant Supervisory Authority to verify the accuracy of the submitted information. According to Related United Nation Security Council Resolution or decisions of the UAE Cabinet regarding issuance of Local Terrorist List, they are to implement the freezing cancellation or lifting decision, when appropriate, without delay.

Enforcement of Targeted Financial Sanctions under the UAE AML/CFT Law

Under the UAE Law, any person, either natural or legal, who fails to comply with these obligations will be liable to imprisonment or a fine not less than AED 50,000 (Fifty Thousand Dirhams) and not more than AED 5,000,000 (Five Million Dirhams).

Do you have any questions regarding your obligation under Cabinet Resolution no 74 of 2020 on Targeted Financial Sanction, contact us now

References:

[1] https://www.uaeiec.gov.ae/en-us/un-page

[2] Article 3 Cabinet Resolution 10 of 2019

[3] Article 23 Cabinet Resolution No. 74 of 2020

[4] Article 21(3) Cabinet Resolution No. 74 of 2020

[5] Article 21 (4) Cabinet Resolution No 74 of 2020

[6] Article 21 (7) Cabinet Resolution No. 74 of 2020