Blog: Anti-Money Laundering And Compliance: The Latest Regulations … – Mondaq

United Arab Emirates:

Anti-Money Laundering And Compliance: The Latest Regulations

17 January 2023

BSA Ahmad Bin Hezeem & Associates LLP

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1. Introduction:

Throughout 2022, the United Arab Emirates (UAE) has reaffirmed
its ongoing commitment and efforts to strengthen its regulatory
framework in relation to anti-money laundering (AML) and counter
terrorist financing (CFT).

As a country that has become an important global financial
center for doing business, the UAE has reiterated its commitment in
working with the international community to combat financial crime
and remind businesses of their obligations in relation to
international sanctions programmes.

The latest updates to the UAE AML and sanctions laws regulations
were issued in 2021.

Throughout 2022, efforts were invested in ensuring proper
implementation of the latest changes and appropriate adaptation of
the programs that aim ensuring fulfilment of FATF
recommendations.

The principal AML/CFT legislation applicable remain to be:

  • Federal Decree-Law No. (20) of 2018 On AML and CFT and
    Financing of Illegal Organisations and implementing regulation
    along with;
  • the Cabinet Decision No. (10) of 2019 Concerning the
    Implementing Regulation of Decree Law No. (20) of 2018 On AML and
    CFT and Illegal Organisations.
  • the Cabinet Resolution No. (24) of 2022 issued lately to amend
    some provisions of the above Cabinet Decision.

The AML Law in the UAE requires Financial Institutions (FIs) and
Designated Non-Financial Business or Professions (DNFBPs)* to
establish a comprehensive AML/CFT Program including AML Policy for
KYC, Screening, Risk Profiling, Governance, STR Filing, and more.
The AML policy, procedures and guidelines have to be commensurate
with the nature and size of the business. The appointment of the
AML Compliance Officer has to ensure that the provisions of the UAE
AML Law are complied with.

To date, effective measures, and proactive regulatory action for
protecting the UAE’s regulatory and financial environment have
been implemented by the competent UAE authorities, including the
Central Bank of the UAE; Securities and Commodities Authority;
Ministry of Economy; Ministry of Justice; Abu Dhabi Global Market;
and the Dubai Financial Services Authority, as well as close
inter-agency cooperation.

These measures were mainly concerned this year on the
application of strict customer due diligence (CDD), ongoing
transaction monitoring, sanctions screening systems and the
importance of the subscription to the sanctions lists, suspicious
transaction reporting and GoAML registration, in addition to the
awareness on the targeted financial sanctions.

The Supervisory Authorities in the UAE continue to monitor the
evolving risk environment and remain agile in identifying emerging
risks and responding promptly by issuing necessary guidance,
spreading awareness and training webinars.

2. Legal & Regulatory updates from
2022:

Legal & Regulatory Update 1:
Circular Number No. (05) of 2022, issued by the Ministry of
Economy (MOE) regarding the Real Estate Activity Report (REAR)
submission by real estate brokers and agents and law
firms.
The real estate sector is one of the main drivers of economic
growth in the country. According to the results of the national
risk assessment, this vital sector is one of the high-risk
sectors.

The Ministry of Economy has recently issued this circular in June
2022 which became effective within 1 week of its publication,
instructing the real estate brokers and the law firms, to report
the specified transactions pertaining to real estate in the new
report named as – Real Estate Activity Report (REAR).

What does this change?

The main purpose of REAR is to curb the illicit investment in
real estate and track down the high-risk transactions around real
estate involving money laundering.

Payments for real estate transactions in the UAE through virtual
assets, sale of virtual assets, or cash amounts above AED 55,000
will now be subject to additional reporting to authorities.

Filing a REAR to report any transaction pertaining to freehold
property is an additional requirement. Submissions of REARs do not
exempt the reporting entities from their existing AML-CFT
obligations to submit the following types of reports via GoAML:

  • Suspicious Transaction Report (STR)
  • Suspicious Activity Report (SAR)
  • Funds Freeze Report (FFR)
  • Partial Name Match Report (PNMR)
What is the impact / implications on
businesses?

This will enhance the sector’s ability to attract safe and
stable investment and help drive sustainable development in the
country in line with international best practices and standards
issued by the Financial Action Task Force (FATF) and consolidates
the UAE’s position as a leading global destination for
investment and business.

These requirements will also provide all stakeholders with
greater transparency in a sector that is a key contributor to the
UAE’s economy.

Will there be any further developments on this in
2023?

This makes UAE one of the first countries to implement such a
mechanism for real estate transactions involving virtual assets and
shows the country’s evolving approach to the global fight
against money laundering and terrorist financing. And it will
definitely improve the quality of financial intelligence available
to the FIU and will be used to trace the suspicious movement of
funds or investments as part of the UAE’s fight against money
laundering and terrorism financing.

Legal & Regulatory Update
2

As part of the CBUAE’s mandate to promote and protect the
stability of the financial system in the UAE, the CBUAE maintains a
regulatory framework applicable to Licensed Financial Institutions
(LFIs) and Licensed Financial Activities.

Within the CBUAE, the Regulatory Development Division is tasked
with developing the regulatory framework by drafting and proposing
regulations, standards, and guidance.

What does this
change?

In 2022, the CBUAE has issued several guidance on AML and CFT on
the risks related to different aspects, particularly focused on
politically exposed persons (PEPs).

These guidelines and regulations will assist LFIs’ adhering
to financial PEP regulations to prevent money laundering and
terrorism financing.

What is the impact / implications on
businesses?

This will assist LFIs’ effective implementation of their
statutory AML/CFT obligations and takes Financial Action Task Force
(FATF) standards into account.

Will there be any further developments
on this in 2023?

CBUAE guidelines and regulations will ensure an adequate
organisation, supervision and development of all financial services
companies in the UAE. This provides an operational framework,
protection for both the finance companies and their customers, and
enhances financial sector stability going forward.

3. Thoughts & expectations for what is to come in
2023

The UAE’s commitment to advancing efforts to combat money
laundering and counter terrorist financing remains a key pillar
underpinning the country’s status as an attractive global
business hub that operates in line with international
standards.

Robust actions and ongoing measures taken by the UAE government
and private sector are in place to combat money laundering and more
specifically counter the proliferation financing in the upcoming
year.

The UAE has chosen to create a specific offence and implement
additional measures of proliferation financing including:

  • Enhancing enforcement against proliferation and proliferation
    financing.
  • Raising awareness and helping to clarify the obligations on
    individuals, firms and FIs to be vigilant to proliferation and
    proliferation financing.
  • Establishing a national definition of proliferation
    financing.
  • Providing a basis for suspicious activity reporting.

In addition, the UAE has published a Control List that can be
found in Cabinet Decision No. 50 of 2020 implementing
internationally agreed dual-use goods subject to import and export
control. The list can be accessed through the EOCN website at https://www.uaeiec.gov.ae/en-us/control-list-good

Moreover, the United Nations Security Council (UNSC) has imposed
sanctions to prevent and counter the proliferation of Weapon of
Mass Destruction (WMD) and its financing, this includes targeted
financial sanctions against specific persons and entities that have
been identified as being connected to the proliferation of WMD. All
UN member states, the UAE included, are required to implement these
measures. Recommendation 7 of the Financial Action Task Force
(FATF) Standards requires countries to implement proliferation
related targeted financial sanctions (TFS) made under UNSC
Resolutions without delay.

Proliferation financing can contribute to global instability and
the UAE has proven its commitment and reiterate that combatting
money laundering, counter financial terrorism and proliferation
finance remains a strategic priority and goal.

We expect extra attention, awareness and requirements that will
be targeting the private sector this upcoming year concerning
proliferation financing and related reporting mechanism in order to
meet the regulatory reporting requirements.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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