The latest guide on Anti Money Laundering (AML) for the legal industry from regulators reinforces their expectation that UAE businesses assess whether or not they should establish an independent audit and determine if it would benefit them in any given case. Regulation 21 of the 2017 Money Laundering Regulations states that an independent audit firm in Dubai must be established when appropriate for the type of organization. First, the firm must determine whether the organization is large enough to warrant an independent audit function.
It is useful to understand the reason the 2017 Regulations included this restriction. Many banks in Dubai and UAE made AML mistakes, despite having staff who gained satisfactory training in AML. The problem was that despite having large internal auditing departments, they weren’t independent enough to spot problems and take corrective action.
Anti Money Laundering
Anti Money laundering refers to changing large amounts of unaccounted money from criminal activities like gambling, drug trafficking, and theft into legitimate sources. This is a severe financial crime committed by both street-level and white-collar criminals. You can be charged with money laundering in the UAE and other countries.
Online banking, cryptocurrency, and modern technology have made it possible to transfer and withdraw money without detection. International efforts have been made to combat money laundering. It also targets terror financing.
Money laundering starts when criminals inject the proceeds from a trade into formal financial systems. Layering is the second stage in money laundering. This makes it difficult to track illicit money for law enforcement and financial authorities in Dubai and UAE. The illicit money can either be converted to legal monetary instruments or used for assets that can later be monetized. It won’t be easy to track the funds. The third stage is to retake the money without the consent or knowledge of the government.
It is quite common to use shell companies to launder money. The shell company is not a legal entity. The shell firms exists only through false records. These companies cannot produce or distribute goods.
Understanding Independent AML Audit
Auditing companies in UAE conduct an independent AML audit to examine a company’s anti-money laundering plan. This is an independent AML audit that does not involve a financial audit. It’s an assessment to see if an effective anti-money laundering program exists.
Usually, AML audits include the below:
- A thorough examination of the Anti-Money Laundering Compliance Program document.
- Testing is underway for the AML Policy and Procedures of the organization.
- Revision of Customer Identification Procedure
- Transactional and test evaluation
- OFAC investigations
- Review of FinCEN files (SARs and CTRs).
Evaluation of AML Training
Continuous evaluations of automated monitoring systems, as well as management information systems, are ongoing. It is worth looking at audit reports from prior years to determine any recommendations’ effectiveness and efficiency.
Who Qualifies To Conduct An AML Audit
AML audits are possible by employees of corporations who aren’t involved in money laundering or by a third party. Only the AML internal audit compliance officer, or any member of their team, can perform an independent audit. Because smaller businesses don’t have enough staff or can’t invest the time or money, they often hire qualified third parties to conduct these audits.
How Often Should Internal Audit Function Conduct An AML Audit
Internal audit services Dubai agents should carry out at a frequency and depth appropriate to the company’s products and services.
AML audits are typically conducted following the Self-Regulatory Organizations, which establish compliance standards for financial firms that are not SRO members. AML audits must be conducted annually by a audit firms in Dubai who are members of the Financial Industry Regulatory Authority.
The difference between an AML Internal Audit and a Financial Audit
A licensed public accountant company performs an independent audit of financial statements. The company’s financial statements are examined on a testing basis. This includes assessing the presentation of financial statements to identify any material misstatements. AML audits confirm that the company has an effective anti-money laundering program and is carrying out what it claims.
There are Three key areas that regulators should be aware of to highlight internal audit weaknesses. Regulators are concerned with the subject matter expertise and experience of auditors. UAE companies want their auditors to be knowledgeable and have the experience.
Planning and scoping
The UAE authorities, of course, has been critical of scope papers and internal audit plans, particularly when companies fail to carry out regular audits. Companies in Dubai and UAE are expected to stick to a at least a12-to-18-month schedule.
Reporting and execution
Regulators frequently question execution by claiming that evaluations are incomplete. To comply with the laid down rules and regulations, firms should conduct extensive testing and reassess samples.
Institution are often criticized by regulators for not having thorough problem validation processes. Enforcement is focused on short-term repairs, long-term control, and independent testing.
For AML Audit Consultation Contact Audit Firms in Dubai.