The United Arab Emirates (UAE) is recognized as an international hub for commercial activities, attracting businesses and professionals from around the world. However, this status as a global business center also brings with it the risk of financial fraud, money laundering, and terror financing. To safeguard its economy and financial system from these threats, the UAE government has implemented stringent Anti-Money Laundering (AML) regulations. Ensuring AML compliance in UAE, the Ministry of Economy of the UAE has announced a comprehensive list of penalties to ensure compliance and deter fraudulent activities in the Designated Non-Financial Businesses and Professions (DNFBPs) that they supervise.
What is Money Laundering?
Money laundering is defined as any financial or banking transaction aimed at concealing or changing the source of illegally obtained funds, by passing it through the financial and banking system in order to make it appear as originating from legitimate sources, and then re-pumping and investing it illegally.
The UAE government takes a zero-tolerance approach to money laundering and terrorism financing. To reinforce this stance, the Ministry of Economy has instituted a tiered system of penalties, depending on the severity of the AML violations committed by DNFBPs. Let’s delve into the different categories of violations and their corresponding fines:
Fine of Dirhams 1 million or more:
- Failure to take special measures concerning customers included in international or local sanction lists before establishing or maintaining a business relationship.
- Opening or maintaining bank accounts using alias, fictitious or fake names, or numbers rather than the holders’ names.
- Dealing with unauthorized banks in any way whatsoever.
Fine of Dirhams 200,000 or more:
- Not taking enhanced due diligence measures to manage high-risk customers.
- Not reporting suspicious transactions to the Financial Information Unit (FIU) when it’s not possible to conduct due diligence before establishing a business relationship.
- Failure to respond to FIU’s requests for additional information regarding reported suspicious transactions.
- Disclosing, directly or indirectly, to customers or third parties, the intention to report them due to suspicions about the nature of their business relationship.
- Failure to implement the measures identified by the National Committee for Combating Money Laundering for customers from high-risk countries.
Fine of Dirhams 100,000 or more:
- Not taking necessary measures to determine crime risks in the DNFBPs’ field of work.
- Failure to identify and evaluate risks when developing services or undertaking new professional practices.
- Not conducting due diligence measures towards clients before establishing or continuing a business relationship.
- Failure to verify the identity of the customer and the real beneficiary using reliable and independent sources before establishing a business relationship or conducting transactions.
- Delay in reporting suspicious transactions to the FIU when there are reasonable grounds to suspect a connection to criminal activity.
- Failure to implement due diligence measures for politically exposed customers.
- Failure to keep records of financial transactions with customers.
Fine of Dirhams 50,000 or more:
- Failure to provide staff training on combating money laundering and terrorism financing.
- Failure to ensure competent authorities access to information related to customers’ due diligence and monitoring.
- Failure to keep records of financial transactions and relevant documents for five years.
- Keeping financial transaction records in a manner that hinders data analysis and tracking.
- Failure to appoint a compliance officer.
- Not conducting due diligence measures for continuous monitoring during the business relationship.
- Failure to understand the nature of the client’s business and the ownership structure.
- Not obtaining necessary information related to the purpose of the business relationship.
- Failure to take simplified due diligence measures for low-risk customers.
- Absence of internal policies, procedures, and controls to combat money laundering and engage in suspicious business relationships.
- Not taking necessary measures to reduce identified risks according to national risk assessment or self-assessment results.
UAE’s Robust Efforts in Combating Money Laundering and Terrorist Financing Yield Remarkable Results
The UAE has taken significant measures to combat money laundering and terrorist financing, resulting in an increase in fines and asset confiscations. In the first quarter of 2023, fines of over Dh115 million were issued, compared to Dh76 million the previous year. 161 fines were handed out to 76 entities during this period. Additionally, frozen assets valued at Dh925 million were seized from November 2022 to February 2023.
The UAE was included on the Financial Action Task Force (FATF) ‘grey list’ last year, prompting it to strengthen its efforts. The country’s director general of the Executive Office for Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) highlighted the progress made in collaboration with the FATF.
The UAE economy has been growing, making it crucial to ensure effective AML/CFT measures across the country and the private sector. Compliance and awareness of financial crimes have improved, indicating a responsive system.
Major achievements in the past year include the UAE ranking fifth globally in confiscations and arrests related to financial crimes. Emirati law enforcement agencies have contributed to international investigations and arrests.
The Financial Intelligence Unit received a significant increase in suspicious transaction reports and suspicious activity reports (STR/SAR) from relevant entities across financial institutions and businesses. Anti-money laundering legislation, especially related to virtual assets, underwent changes.
The UAE Central Bank and the Ministry of Economy have been actively conducting inspections and issuing fines to ensure AML Compliance in UAE. The UAE signed bilateral Mutual Legal Assistance Treaties and collaborated with international partners to combat financial crime.
The Executive Office has conducted outreach sessions to share risk-assessment outcomes and information with public and private-sector personnel.
In November, the Association of Certified Anti-Money Laundering Specialists will hold a conference in Dubai, bringing together regulators and industry leaders to discuss the latest insights and practical strategies to fight financial crime.
The UAE’s Ministry of Economy has demonstrated its commitment to combating money laundering and terrorism financing through the imposition of strict penalties on Designated Non-Financial Businesses and Professions. By implementing this comprehensive list of fines, the UAE aims to deter illicit financial activities and protect its reputation as an international business hub. DNFBPs in the UAE should ensure they comply with AML regulations and maintain robust internal controls, fortified by AML Compliance Services in UAE, to safeguard against financial fraud and malpractices. A culture of compliance, continuous staff training, and collaboration with regulatory authorities, guided by AML Compliance Specialists in UAE, are essential for businesses to thrive in a secure and trusted environment in the UAE.